Correlation Between Global Electrical and Military Insurance

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

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

Diversification Opportunities for Global Electrical and Military Insurance

0.48

Correlation Coefficient

Global Electrical  Military Insurance

Very weak diversification

The 3 months correlation between Global and Military is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Electrical Technology and Military Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Military Insurance Corp and Global Electrical 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 Global Electrical Technology are associated (or correlated) with Military Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Military Insurance Corp has no effect on the direction of Global Electrical i.e., Global Electrical and Military Insurance go up and down completely randomly.

Pair Corralation between Global Electrical and Military Insurance

Assuming the 90 days trading horizon Global Electrical Technology is expected to generate 4.59 times more return on investment than Military Insurance. However, Global Electrical is 4.59 times more volatile than Military Insurance Corp. It trades about 0.37 of its potential returns per unit of risk. Military Insurance Corp is currently generating about 0.2 per unit of risk. If you would invest  2,600,000  in Global Electrical Technology on December 4, 2024 and sell it today you would earn a total of  880,000  from holding Global Electrical Technology or generate 33.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

Global Electrical Technology  vs.  Military Insurance Corp

Global Electrical

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Electrical Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global Electrical displayed solid returns over the last few months and may actually be approaching a breakup point.

Military Insurance Corp

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Global Electrical and Military Insurance

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

The idea behind Global Electrical Technology and Military Insurance Corp 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.