Correlation Between GUINEA INSURANCE and MEYER PLC

Can any of the company-specific risk be diversified away by investing in both GUINEA INSURANCE and MEYER PLC 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 GUINEA INSURANCE and MEYER PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for GUINEA INSURANCE and MEYER PLC

-0.36

Correlation Coefficient

GUINEA INSURANCE  MEYER PLC

Very good diversification

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

Pair Corralation between GUINEA INSURANCE and MEYER PLC

Assuming the 90 days trading horizon GUINEA INSURANCE is expected to generate 1.9 times less return on investment than MEYER PLC. In addition to that, GUINEA INSURANCE is 1.62 times more volatile than MEYER PLC. It trades about 0.06 of its total potential returns per unit of risk. MEYER PLC is currently generating about 0.17 per unit of volatility. If you would invest  583.00  in MEYER PLC on September 12, 2024 and sell it today you would earn a total of  184.00  from holding MEYER PLC or generate 31.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

GUINEA INSURANCE PLC  vs.  MEYER PLC

GUINEA INSURANCE PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GUINEA INSURANCE PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, GUINEA INSURANCE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

MEYER PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MEYER PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, MEYER PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUINEA INSURANCE and MEYER PLC

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

The idea behind GUINEA INSURANCE PLC and MEYER PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.