Correlation Between IDI Insurance and Capital Point

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

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

Diversification Opportunities for IDI Insurance and Capital Point

-0.58

Correlation Coefficient

IDI Insurance  Capital Point

Excellent diversification

The 3 months correlation between IDI and Capital is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding IDI Insurance and Capital Point in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Point and IDI 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 IDI Insurance are associated (or correlated) with Capital Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Point has no effect on the direction of IDI Insurance i.e., IDI Insurance and Capital Point go up and down completely randomly.

Pair Corralation between IDI Insurance and Capital Point

Assuming the 90 days trading horizon IDI Insurance is expected to generate 0.72 times more return on investment than Capital Point. However, IDI Insurance is 1.4 times less risky than Capital Point. It trades about 0.31 of its potential returns per unit of risk. Capital Point is currently generating about 0.07 per unit of risk. If you would invest  1,308,090  in IDI Insurance on December 2, 2024 and sell it today you would earn a total of  378,910  from holding IDI Insurance or generate 28.97% return on investment over 90 days.

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

IDI Insurance  vs.  Capital Point

IDI Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDI Insurance are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IDI Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Capital Point

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Point are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capital Point may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IDI Insurance and Capital Point

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

The idea behind IDI Insurance and Capital Point 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.