Correlation Between Data Agro and Premier Insurance

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

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

Diversification Opportunities for Data Agro and Premier Insurance

-0.17

Correlation Coefficient

Data Agro  Premier Insurance

Good diversification

The 3 months correlation between Data and Premier is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance and Data Agro 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 Data Agro are associated (or correlated) with Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Data Agro i.e., Data Agro and Premier Insurance go up and down completely randomly.

Pair Corralation between Data Agro and Premier Insurance

Assuming the 90 days trading horizon Data Agro is expected to under-perform the Premier Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Data Agro is 1.02 times less risky than Premier Insurance. The stock trades about -0.33 of its potential returns per unit of risk. The Premier Insurance is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  549.00  in Premier Insurance on December 5, 2024 and sell it today you would lose (61.00) from holding Premier Insurance or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Data Agro  vs.  Premier Insurance

Data Agro

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Agro are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Data Agro sustained solid returns over the last few months and may actually be approaching a breakup point.

Premier Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Data Agro and Premier Insurance

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

The idea behind Data Agro and Premier Insurance 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.