Correlation Between Premier Insurance and Security Investment

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

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

Diversification Opportunities for Premier Insurance and Security Investment

-0.19

Correlation Coefficient

Premier Insurance  Security Investment

Good diversification

The 3 months correlation between Premier and Security is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Security Investment Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Investment Bank 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 Security Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Investment Bank has no effect on the direction of Premier Insurance i.e., Premier Insurance and Security Investment go up and down completely randomly.

Pair Corralation between Premier Insurance and Security Investment

Assuming the 90 days trading horizon Premier Insurance is expected to generate 49.95 times less return on investment than Security Investment. But when comparing it to its historical volatility, Premier Insurance is 1.53 times less risky than Security Investment. It trades about 0.01 of its potential returns per unit of risk. Security Investment Bank is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Security Investment Bank on September 28, 2024 and sell it today you would earn a total of  199.00  from holding Security Investment Bank or generate 39.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Premier Insurance  vs.  Security Investment Bank

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.

Security Investment Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Security Investment Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Security Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Security Investment

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

The idea behind Premier Insurance and Security Investment Bank 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.