Correlation Between Premier Insurance and Hub Power

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

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

Diversification Opportunities for Premier Insurance and Hub Power

0.42

Correlation Coefficient

Premier Insurance  Hub Power

Very weak diversification

The 3 months correlation between Premier and Hub is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power 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 Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Premier Insurance i.e., Premier Insurance and Hub Power go up and down completely randomly.

Pair Corralation between Premier Insurance and Hub Power

Assuming the 90 days trading horizon Premier Insurance is expected to generate 1.28 times more return on investment than Hub Power. However, Premier Insurance is 1.28 times more volatile than Hub Power. It trades about -0.02 of its potential returns per unit of risk. Hub Power is currently generating about -0.07 per unit of risk. If you would invest  640.00  in Premier Insurance on September 16, 2024 and sell it today you would lose (40.00) from holding Premier Insurance or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.46%
Values	Daily Returns

Premier Insurance  vs.  Hub Power

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.

Hub Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hub Power 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.

Pair Trading with Premier Insurance and Hub Power

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

The idea behind Premier Insurance and Hub Power 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.