Correlation Between Premier Insurance and International Steels

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

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

Diversification Opportunities for Premier Insurance and International Steels

-0.07

Correlation Coefficient

Premier Insurance  International Steels

Good diversification

The 3 months correlation between Premier and International is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Premier Insurance i.e., Premier Insurance and International Steels go up and down completely randomly.

Pair Corralation between Premier Insurance and International Steels

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the International Steels. In addition to that, Premier Insurance is 1.08 times more volatile than International Steels. It trades about -0.05 of its total potential returns per unit of risk. International Steels is currently generating about 0.03 per unit of volatility. If you would invest  7,880  in International Steels on December 2, 2024 and sell it today you would earn a total of  269.00  from holding International Steels or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Premier Insurance  vs.  International Steels

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

International Steels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, International Steels is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Premier Insurance and International Steels

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

The idea behind Premier Insurance and International Steels 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.