Correlation Between Premier Insurance and Allied Bank

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

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

Diversification Opportunities for Premier Insurance and Allied Bank

0.0

Correlation Coefficient

Premier Insurance  Allied Bank

Pay attention - limited upside

The 3 months correlation between Premier and Allied is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Allied Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Bank and Premier 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 Premier Insurance are associated (or correlated) with Allied Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Bank has no effect on the direction of Premier Insurance i.e., Premier Insurance and Allied Bank go up and down completely randomly.

Pair Corralation between Premier Insurance and Allied Bank

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the Allied Bank. In addition to that, Premier Insurance is 1.79 times more volatile than Allied Bank. It trades about -0.01 of its total potential returns per unit of risk. Allied Bank is currently generating about 0.05 per unit of volatility. If you would invest  12,909  in Allied Bank on December 22, 2024 and sell it today you would earn a total of  581.00  from holding Allied Bank or generate 4.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	87.1%
Values	Daily Returns

Premier Insurance  vs.  Allied Bank

Premier Insurance

Risk-Adjusted Performance

Very Weak

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

Allied Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Allied Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Premier Insurance and Allied Bank

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

The idea behind Premier Insurance and Allied Bank 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.