Correlation Between General Insurance and Diligent Media

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

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

Diversification Opportunities for General Insurance and Diligent Media

0.63

Correlation Coefficient

General Insurance  Diligent Media

Poor diversification

The 3 months correlation between General and Diligent is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media and General Insurance 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 General Insurance are associated (or correlated) with Diligent Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diligent Media has no effect on the direction of General Insurance i.e., General Insurance and Diligent Media go up and down completely randomly.

Pair Corralation between General Insurance and Diligent Media

Assuming the 90 days trading horizon General Insurance is expected to generate 0.82 times more return on investment than Diligent Media. However, General Insurance is 1.22 times less risky than Diligent Media. It trades about -0.01 of its potential returns per unit of risk. Diligent Media is currently generating about -0.1 per unit of risk. If you would invest  41,102  in General Insurance on September 3, 2024 and sell it today you would lose (1,142) from holding General Insurance or give up 2.78% of portfolio value over 90 days.

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

General Insurance  vs.  Diligent Media

General Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, General Insurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Diligent Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diligent Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with General Insurance and Diligent Media

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

The idea behind General Insurance and Diligent Media 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 Commodity Directory module to find actively traded commodities issued by global exchanges.