Correlation Between Paramount Communications and General Insurance

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

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

Diversification Opportunities for Paramount Communications and General Insurance

0.52

Correlation Coefficient

Paramount Communications  General Insurance

Very weak diversification

The 3 months correlation between Paramount and General is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Paramount Communications 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 Paramount Communications Limited are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Paramount Communications i.e., Paramount Communications and General Insurance go up and down completely randomly.

Pair Corralation between Paramount Communications and General Insurance

Assuming the 90 days trading horizon Paramount Communications is expected to generate 1.5 times less return on investment than General Insurance. In addition to that, Paramount Communications is 1.08 times more volatile than General Insurance. It trades about 0.06 of its total potential returns per unit of risk. General Insurance is currently generating about 0.09 per unit of volatility. If you would invest  38,684  in General Insurance on September 22, 2024 and sell it today you would earn a total of  11,416  from holding General Insurance or generate 29.51% return on investment over 90 days.

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

Paramount Communications Limit  vs.  General Insurance

Paramount Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paramount Communications and General Insurance

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

The idea behind Paramount Communications Limited and General 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..