Correlation Between Premier Insurance and AKD Hospitality

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

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

Diversification Opportunities for Premier Insurance and AKD Hospitality

0.09

Correlation Coefficient

Premier Insurance  AKD Hospitality

Significant diversification

The 3 months correlation between Premier and AKD is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality 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 AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Premier Insurance i.e., Premier Insurance and AKD Hospitality go up and down completely randomly.

Pair Corralation between Premier Insurance and AKD Hospitality

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the AKD Hospitality. In addition to that, Premier Insurance is 1.4 times more volatile than AKD Hospitality. It trades about -0.01 of its total potential returns per unit of risk. AKD Hospitality is currently generating about 0.0 per unit of volatility. If you would invest  15,331  in AKD Hospitality on December 22, 2024 and sell it today you would lose (281.00) from holding AKD Hospitality or give up 1.83% of portfolio value over 90 days.

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

Premier Insurance  vs.  AKD Hospitality

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 current stock price disturbance, may contribute to short-term losses for the investors.

AKD Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKD Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, AKD Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Premier Insurance and AKD Hospitality

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

The idea behind Premier Insurance and AKD Hospitality 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.