Correlation Between Premier Insurance and NetSol Technologies

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

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

Diversification Opportunities for Premier Insurance and NetSol Technologies

0.24

Correlation Coefficient

Premier Insurance  NetSol Technologies

Modest diversification

The 3 months correlation between Premier and NetSol is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Premier Insurance i.e., Premier Insurance and NetSol Technologies go up and down completely randomly.

Pair Corralation between Premier Insurance and NetSol Technologies

Assuming the 90 days trading horizon Premier Insurance is expected to generate 1.59 times more return on investment than NetSol Technologies. However, Premier Insurance is 1.59 times more volatile than NetSol Technologies. It trades about 0.01 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.06 per unit of risk. If you would invest  551.00  in Premier Insurance on December 25, 2024 and sell it today you would lose (2.00) from holding Premier Insurance or give up 0.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

Premier Insurance  vs.  NetSol Technologies

Premier Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

NetSol Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days NetSol Technologies 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.

Pair Trading with Premier Insurance and NetSol Technologies

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

The idea behind Premier Insurance and NetSol Technologies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.