Correlation Between Insurance Portfolio and Leisure Portfolio

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

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

Diversification Opportunities for Insurance Portfolio and Leisure Portfolio

0.83

Correlation Coefficient

Insurance Portfolio  Leisure Portfolio

Very poor diversification

The 3 months correlation between INSURANCE and Leisure is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Portfolio Insurance and Leisure Portfolio Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Portfolio Leisure and Insurance 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 Insurance Portfolio Insurance are associated (or correlated) with Leisure Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Portfolio Leisure has no effect on the direction of Insurance Portfolio i.e., Insurance Portfolio and Leisure Portfolio go up and down completely randomly.

Pair Corralation between Insurance Portfolio and Leisure Portfolio

Assuming the 90 days horizon Insurance Portfolio Insurance is expected to under-perform the Leisure Portfolio. But the mutual fund apears to be less risky and, when comparing its historical volatility, Insurance Portfolio Insurance is 1.08 times less risky than Leisure Portfolio. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Leisure Portfolio Leisure is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,283  in Leisure Portfolio Leisure on November 29, 2024 and sell it today you would lose (121.00) from holding Leisure Portfolio Leisure or give up 5.3% of portfolio value over 90 days.

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

Insurance Portfolio Insurance  vs.  Leisure Portfolio Leisure

Insurance Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Portfolio Insurance has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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.

Pair Trading with Insurance Portfolio and Leisure Portfolio

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

The idea behind Insurance Portfolio Insurance and Leisure Portfolio Leisure 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.