Correlation Between Insurance Portfolio and Transportation Fund

Can any of the company-specific risk be diversified away by investing in both Insurance Portfolio and Transportation Fund 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 Transportation Fund 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 Transportation Fund Investor, you can compare the effects of market volatilities on Insurance Portfolio and Transportation Fund 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 Transportation Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Portfolio and Transportation Fund.

Diversification Opportunities for Insurance Portfolio and Transportation Fund

0.36

Correlation Coefficient

Insurance Portfolio  Transportation Fund

Weak diversification

The 3 months correlation between Insurance and Transportation is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Portfolio Insurance and Transportation Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Fund 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 Transportation Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Fund has no effect on the direction of Insurance Portfolio i.e., Insurance Portfolio and Transportation Fund go up and down completely randomly.

Pair Corralation between Insurance Portfolio and Transportation Fund

Assuming the 90 days horizon Insurance Portfolio Insurance is expected to under-perform the Transportation Fund. In addition to that, Insurance Portfolio is 1.19 times more volatile than Transportation Fund Investor. It trades about -0.42 of its total potential returns per unit of risk. Transportation Fund Investor is currently generating about -0.17 per unit of volatility. If you would invest  6,363  in Transportation Fund Investor on October 4, 2024 and sell it today you would lose (269.00) from holding Transportation Fund Investor or give up 4.23% of portfolio value over 90 days.

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

Insurance Portfolio Insurance  vs.  Transportation Fund Investor

Insurance Portfolio

Risk-Adjusted Performance

0 of 100

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.

Transportation Fund

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transportation Fund Investor are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transportation Fund 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 Transportation Fund

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

The idea behind Insurance Portfolio Insurance and Transportation Fund Investor 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.