Correlation Between Premier Insurance and Oil

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

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

Diversification Opportunities for Premier Insurance and Oil

-0.15

Correlation Coefficient

Premier Insurance  Oil

Good diversification

The 3 months correlation between Premier and Oil is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Premier Insurance i.e., Premier Insurance and Oil go up and down completely randomly.

Pair Corralation between Premier Insurance and Oil

Assuming the 90 days trading horizon Premier Insurance is expected to generate 2.17 times less return on investment than Oil. In addition to that, Premier Insurance is 2.49 times more volatile than Oil and Gas. It trades about 0.02 of its total potential returns per unit of risk. Oil and Gas is currently generating about 0.1 per unit of volatility. If you would invest  7,163  in Oil and Gas on October 15, 2024 and sell it today you would earn a total of  15,333  from holding Oil and Gas or generate 214.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.32%
Values	Daily Returns

Premier Insurance  vs.  Oil and Gas

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 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.

Oil and Gas

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Oil

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

The idea behind Premier Insurance and Oil and Gas 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.