Correlation Between INTERNATIONAL ENERGY and AIICO INSURANCE

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

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

Diversification Opportunities for INTERNATIONAL ENERGY and AIICO INSURANCE

0.74

Correlation Coefficient

INTERNATIONAL ENERGY  AIICO INSURANCE

Poor diversification

The 3 months correlation between INTERNATIONAL and AIICO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL ENERGY INSURANCE and AIICO INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIICO INSURANCE PLC and INTERNATIONAL ENERGY 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 INTERNATIONAL ENERGY INSURANCE are associated (or correlated) with AIICO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIICO INSURANCE PLC has no effect on the direction of INTERNATIONAL ENERGY i.e., INTERNATIONAL ENERGY and AIICO INSURANCE go up and down completely randomly.

Pair Corralation between INTERNATIONAL ENERGY and AIICO INSURANCE

Assuming the 90 days trading horizon INTERNATIONAL ENERGY is expected to generate 2.07 times less return on investment than AIICO INSURANCE. In addition to that, INTERNATIONAL ENERGY is 1.08 times more volatile than AIICO INSURANCE PLC. It trades about 0.06 of its total potential returns per unit of risk. AIICO INSURANCE PLC is currently generating about 0.14 per unit of volatility. If you would invest  110.00  in AIICO INSURANCE PLC on October 7, 2024 and sell it today you would earn a total of  62.00  from holding AIICO INSURANCE PLC or generate 56.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

INTERNATIONAL ENERGY INSURANCE  vs.  AIICO INSURANCE PLC

INTERNATIONAL ENERGY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL ENERGY INSURANCE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERNATIONAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

AIICO INSURANCE PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL ENERGY and AIICO INSURANCE

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

The idea behind INTERNATIONAL ENERGY INSURANCE and AIICO INSURANCE 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 Transaction History module to view history of all your transactions and understand their impact on performance.