Correlation Between General Insurance and Fortis Healthcare

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

By analyzing existing cross correlation between General Insurance and Fortis Healthcare Limited, you can compare the effects of market volatilities on General Insurance and Fortis Healthcare 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 Fortis Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Insurance and Fortis Healthcare.

Diversification Opportunities for General Insurance and Fortis Healthcare

-0.16

Correlation Coefficient

General Insurance  Fortis Healthcare

Good diversification

The 3 months correlation between General and Fortis is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Fortis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Healthcare 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 Fortis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Healthcare has no effect on the direction of General Insurance i.e., General Insurance and Fortis Healthcare go up and down completely randomly.

Pair Corralation between General Insurance and Fortis Healthcare

Assuming the 90 days trading horizon General Insurance is expected to generate 0.92 times more return on investment than Fortis Healthcare. However, General Insurance is 1.09 times less risky than Fortis Healthcare. It trades about 0.24 of its potential returns per unit of risk. Fortis Healthcare Limited is currently generating about 0.21 per unit of risk. If you would invest  36,325  in General Insurance on September 4, 2024 and sell it today you would earn a total of  3,985  from holding General Insurance or generate 10.97% return on investment over 90 days.

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

General Insurance  vs.  Fortis Healthcare Limited

General Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, General Insurance is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fortis Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Insurance and Fortis Healthcare

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

The idea behind General Insurance and Fortis Healthcare Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.