Correlation Between Southern Rubber and Military Insurance

Can any of the company-specific risk be diversified away by investing in both Southern Rubber and Military 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 Southern Rubber and Military Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southern Rubber Industry and Military Insurance Corp, you can compare the effects of market volatilities on Southern Rubber and Military 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 Southern Rubber with a short position of Military Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Rubber and Military Insurance.

Diversification Opportunities for Southern Rubber and Military Insurance

0.56

Correlation Coefficient

Southern Rubber  Military Insurance

Very weak diversification

The 3 months correlation between Southern and Military is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Southern Rubber Industry and Military Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Military Insurance Corp and Southern Rubber 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 Southern Rubber Industry are associated (or correlated) with Military Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Military Insurance Corp has no effect on the direction of Southern Rubber i.e., Southern Rubber and Military Insurance go up and down completely randomly.

Pair Corralation between Southern Rubber and Military Insurance

Assuming the 90 days trading horizon Southern Rubber Industry is expected to under-perform the Military Insurance. In addition to that, Southern Rubber is 1.44 times more volatile than Military Insurance Corp. It trades about -0.06 of its total potential returns per unit of risk. Military Insurance Corp is currently generating about -0.06 per unit of volatility. If you would invest  1,845,000  in Military Insurance Corp on December 24, 2024 and sell it today you would lose (105,000) from holding Military Insurance Corp or give up 5.69% of portfolio value over 90 days.

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

Southern Rubber Industry  vs.  Military Insurance Corp

Southern Rubber Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Rubber Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Military Insurance Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Military Insurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Military Insurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Southern Rubber and Military Insurance

The main advantage of trading using opposite Southern Rubber and Military Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Rubber position performs unexpectedly, Military 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 Military Insurance will offset losses from the drop in Military Insurance's long position.

The idea behind Southern Rubber Industry and Military Insurance Corp 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 Stocks Directory module to find actively traded stocks across global markets.