Correlation Between Mohandes Insurance and Act Financial

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

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

Diversification Opportunities for Mohandes Insurance and Act Financial

0.38

Correlation Coefficient

Mohandes Insurance  Act Financial

Weak diversification

The 3 months correlation between Mohandes and Act is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mohandes Insurance and Act Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Act Financial and Mohandes 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 Mohandes Insurance are associated (or correlated) with Act Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Act Financial has no effect on the direction of Mohandes Insurance i.e., Mohandes Insurance and Act Financial go up and down completely randomly.

Pair Corralation between Mohandes Insurance and Act Financial

Assuming the 90 days trading horizon Mohandes Insurance is expected to generate 0.92 times more return on investment than Act Financial. However, Mohandes Insurance is 1.09 times less risky than Act Financial. It trades about 0.17 of its potential returns per unit of risk. Act Financial is currently generating about 0.06 per unit of risk. If you would invest  1,908  in Mohandes Insurance on October 7, 2024 and sell it today you would earn a total of  506.00  from holding Mohandes Insurance or generate 26.52% return on investment over 90 days.

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

Mohandes Insurance  vs.  Act Financial

Mohandes Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mohandes Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mohandes Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Act Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Act Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Act Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mohandes Insurance and Act Financial

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

The idea behind Mohandes Insurance and Act Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.