Correlation Between General Insurance and Next Mediaworks

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

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

Diversification Opportunities for General Insurance and Next Mediaworks

0.77

Correlation Coefficient

General Insurance  Next Mediaworks

Poor diversification

The 3 months correlation between General and Next is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Next Mediaworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Mediaworks 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 Next Mediaworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Mediaworks has no effect on the direction of General Insurance i.e., General Insurance and Next Mediaworks go up and down completely randomly.

Pair Corralation between General Insurance and Next Mediaworks

Assuming the 90 days trading horizon General Insurance is expected to generate 1.36 times more return on investment than Next Mediaworks. However, General Insurance is 1.36 times more volatile than Next Mediaworks Limited. It trades about -0.02 of its potential returns per unit of risk. Next Mediaworks Limited is currently generating about -0.15 per unit of risk. If you would invest  46,545  in General Insurance on December 26, 2024 and sell it today you would lose (3,810) from holding General Insurance or give up 8.19% 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.  Next Mediaworks Limited

General Insurance

Risk-Adjusted Performance

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.

Next Mediaworks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Next Mediaworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with General Insurance and Next Mediaworks

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

The idea behind General Insurance and Next Mediaworks 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.