Correlation Between Indara Insurance and AIM Industrial

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

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

Diversification Opportunities for Indara Insurance and AIM Industrial

0.3

Correlation Coefficient

Indara Insurance  AIM Industrial

Weak diversification

The 3 months correlation between Indara and AIM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Indara Insurance Public and AIM Industrial Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIM Industrial Growth and Indara 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 Indara Insurance Public are associated (or correlated) with AIM Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIM Industrial Growth has no effect on the direction of Indara Insurance i.e., Indara Insurance and AIM Industrial go up and down completely randomly.

Pair Corralation between Indara Insurance and AIM Industrial

Assuming the 90 days trading horizon Indara Insurance Public is expected to generate 50.6 times more return on investment than AIM Industrial. However, Indara Insurance is 50.6 times more volatile than AIM Industrial Growth. It trades about 0.04 of its potential returns per unit of risk. AIM Industrial Growth is currently generating about 0.01 per unit of risk. If you would invest  23,300  in Indara Insurance Public on September 24, 2024 and sell it today you would lose (15,725) from holding Indara Insurance Public or give up 67.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Indara Insurance Public  vs.  AIM Industrial Growth

Indara Insurance Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indara Insurance Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

AIM Industrial Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIM Industrial Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, AIM Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Indara Insurance and AIM Industrial

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

The idea behind Indara Insurance Public and AIM Industrial Growth 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 Transaction History module to view history of all your transactions and understand their impact on performance.