Correlation Between Premier Insurance and EFU General

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

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

Diversification Opportunities for Premier Insurance and EFU General

-0.44

Correlation Coefficient

Premier Insurance  EFU General

Very good diversification

The 3 months correlation between Premier and EFU is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance 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 EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of Premier Insurance i.e., Premier Insurance and EFU General go up and down completely randomly.

Pair Corralation between Premier Insurance and EFU General

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the EFU General. In addition to that, Premier Insurance is 1.52 times more volatile than EFU General Insurance. It trades about 0.0 of its total potential returns per unit of risk. EFU General Insurance is currently generating about 0.11 per unit of volatility. If you would invest  8,243  in EFU General Insurance on September 27, 2024 and sell it today you would earn a total of  3,557  from holding EFU General Insurance or generate 43.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.49%
Values	Daily Returns

Premier Insurance  vs.  EFU General Insurance

Premier Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EFU General Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and EFU General

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

The idea behind Premier Insurance and EFU 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.