Correlation Between Leisure Portfolio and Insurance Portfolio

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

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

Diversification Opportunities for Leisure Portfolio and Insurance Portfolio

-0.09

Correlation Coefficient

Leisure Portfolio  Insurance Portfolio

Good diversification

The 3 months correlation between Leisure and Insurance is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Portfolio Leisure and Insurance Portfolio Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Portfolio and Leisure Portfolio 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 Leisure Portfolio Leisure are associated (or correlated) with Insurance Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Portfolio has no effect on the direction of Leisure Portfolio i.e., Leisure Portfolio and Insurance Portfolio go up and down completely randomly.

Pair Corralation between Leisure Portfolio and Insurance Portfolio

Assuming the 90 days horizon Leisure Portfolio Leisure is expected to under-perform the Insurance Portfolio. In addition to that, Leisure Portfolio is 1.31 times more volatile than Insurance Portfolio Insurance. It trades about -0.06 of its total potential returns per unit of risk. Insurance Portfolio Insurance is currently generating about 0.12 per unit of volatility. If you would invest  9,018  in Insurance Portfolio Insurance on December 31, 2024 and sell it today you would earn a total of  637.00  from holding Insurance Portfolio Insurance or generate 7.06% return on investment over 90 days.

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

Leisure Portfolio Leisure  vs.  Insurance Portfolio Insurance

Leisure Portfolio Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leisure Portfolio Leisure has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leisure Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Insurance Portfolio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Portfolio Insurance are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Insurance Portfolio may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Leisure Portfolio and Insurance Portfolio

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

The idea behind Leisure Portfolio Leisure and Insurance Portfolio 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.