Correlation Between East West and Century Insurance

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

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

Diversification Opportunities for East West and Century Insurance

-0.3

Correlation Coefficient

East West  Century Insurance

Very good diversification

The 3 months correlation between East and Century is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and East West 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 East West Insurance are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of East West i.e., East West and Century Insurance go up and down completely randomly.

Pair Corralation between East West and Century Insurance

Assuming the 90 days trading horizon East West is expected to generate 1.13 times less return on investment than Century Insurance. In addition to that, East West is 1.44 times more volatile than Century Insurance. It trades about 0.15 of its total potential returns per unit of risk. Century Insurance is currently generating about 0.24 per unit of volatility. If you would invest  2,680  in Century Insurance on September 15, 2024 and sell it today you would earn a total of  1,069  from holding Century Insurance or generate 39.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.03%
Values	Daily Returns

East West Insurance  vs.  Century Insurance

East West Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in East West Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East West sustained solid returns over the last few months and may actually be approaching a breakup point.

Century Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East West and Century Insurance

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

The idea behind East West Insurance and Century 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.