Correlation Between Commercial Credit and Peoples Insurance

Can any of the company-specific risk be diversified away by investing in both Commercial Credit and Peoples Insurance at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Commercial Credit and Peoples Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commercial Credit and and Peoples Insurance PLC, you can compare the effects of market volatilities on Commercial Credit and Peoples Insurance and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Commercial Credit with a short position of Peoples Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Credit and Peoples Insurance.

Diversification Opportunities for Commercial Credit and Peoples Insurance

0.95

Correlation Coefficient

Commercial Credit  Peoples Insurance

Almost no diversification

The 3 months correlation between Commercial and Peoples is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Credit and and Peoples Insurance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Insurance PLC and Commercial Credit is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Commercial Credit and are associated (or correlated) with Peoples Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Insurance PLC has no effect on the direction of Commercial Credit i.e., Commercial Credit and Peoples Insurance go up and down completely randomly.

Pair Corralation between Commercial Credit and Peoples Insurance

Assuming the 90 days trading horizon Commercial Credit is expected to generate 1.24 times less return on investment than Peoples Insurance. But when comparing it to its historical volatility, Commercial Credit and is 1.35 times less risky than Peoples Insurance. It trades about 0.12 of its potential returns per unit of risk. Peoples Insurance PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,450  in Peoples Insurance PLC on December 4, 2024 and sell it today you would earn a total of  460.00  from holding Peoples Insurance PLC or generate 18.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Commercial Credit and  vs.  Peoples Insurance PLC

Commercial Credit

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial Credit and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Commercial Credit sustained solid returns over the last few months and may actually be approaching a breakup point.

Peoples Insurance PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Insurance PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peoples Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial Credit and Peoples Insurance

The main advantage of trading using opposite Commercial Credit and Peoples Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Credit position performs unexpectedly, Peoples Insurance can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Peoples Insurance will offset losses from the drop in Peoples Insurance's long position.

The idea behind Commercial Credit and and Peoples Insurance PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..