Correlation Between Premier Insurance and Masood Textile

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

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

Diversification Opportunities for Premier Insurance and Masood Textile

0.79

Correlation Coefficient

Premier Insurance  Masood Textile

Poor diversification

The 3 months correlation between Premier and Masood is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills 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 Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of Premier Insurance i.e., Premier Insurance and Masood Textile go up and down completely randomly.

Pair Corralation between Premier Insurance and Masood Textile

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the Masood Textile. But the stock apears to be less risky and, when comparing its historical volatility, Premier Insurance is 1.19 times less risky than Masood Textile. The stock trades about -0.02 of its potential returns per unit of risk. The Masood Textile Mills is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,589  in Masood Textile Mills on September 16, 2024 and sell it today you would lose (302.00) from holding Masood Textile Mills or give up 5.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.08%
Values	Daily Returns

Premier Insurance  vs.  Masood Textile Mills

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.

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Masood Textile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Premier Insurance and Masood Textile

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

The idea behind Premier Insurance and Masood Textile Mills 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.