Correlation Between Premier Insurance and Habib Insurance

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

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

Diversification Opportunities for Premier Insurance and Habib Insurance

-0.18

Correlation Coefficient

Premier Insurance  Habib Insurance

Good diversification

The 3 months correlation between Premier and Habib is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib 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 Habib Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Insurance has no effect on the direction of Premier Insurance i.e., Premier Insurance and Habib Insurance go up and down completely randomly.

Pair Corralation between Premier Insurance and Habib Insurance

Assuming the 90 days trading horizon Premier Insurance is expected to generate 2.2 times less return on investment than Habib Insurance. But when comparing it to its historical volatility, Premier Insurance is 1.28 times less risky than Habib Insurance. It trades about 0.13 of its potential returns per unit of risk. Habib Insurance is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  698.00  in Habib Insurance on September 16, 2024 and sell it today you would earn a total of  142.00  from holding Habib Insurance or generate 20.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Premier Insurance  vs.  Habib 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 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.

Habib Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Habib Insurance

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

The idea behind Premier Insurance and Habib 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.