Correlation Between IBL HealthCare and Century Insurance

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

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

Diversification Opportunities for IBL HealthCare and Century Insurance

-0.81

Correlation Coefficient

IBL HealthCare  Century Insurance

Pay attention - limited upside

The 3 months correlation between IBL and Century is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and IBL HealthCare 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 IBL HealthCare are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and Century Insurance go up and down completely randomly.

Pair Corralation between IBL HealthCare and Century Insurance

Assuming the 90 days trading horizon IBL HealthCare is expected to under-perform the Century Insurance. In addition to that, IBL HealthCare is 1.45 times more volatile than Century Insurance. It trades about -0.06 of its total potential returns per unit of risk. Century Insurance is currently generating about 0.24 per unit of volatility. If you would invest  3,787  in Century Insurance on December 30, 2024 and sell it today you would earn a total of  1,022  from holding Century Insurance or generate 26.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

IBL HealthCare  vs.  Century Insurance

IBL HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days IBL HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Century Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBL HealthCare and Century Insurance

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

The idea behind IBL HealthCare and Century Insurance 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.