Correlation Between Premier Insurance and Millat Tractors

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

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

Diversification Opportunities for Premier Insurance and Millat Tractors

-0.41

Correlation Coefficient

Premier Insurance  Millat Tractors

Very good diversification

The 3 months correlation between Premier and Millat is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors 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 Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Premier Insurance i.e., Premier Insurance and Millat Tractors go up and down completely randomly.

Pair Corralation between Premier Insurance and Millat Tractors

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the Millat Tractors. But the stock apears to be less risky and, when comparing its historical volatility, Premier Insurance is 2.61 times less risky than Millat Tractors. The stock trades about -0.07 of its potential returns per unit of risk. The Millat Tractors is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  62,291  in Millat Tractors on October 23, 2024 and sell it today you would earn a total of  8,997  from holding Millat Tractors or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Premier Insurance  vs.  Millat Tractors

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.

Millat Tractors

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Millat Tractors

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

The idea behind Premier Insurance and Millat Tractors 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .