Correlation Between Premier Insurance and Synthetic Products

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

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

Diversification Opportunities for Premier Insurance and Synthetic Products

-0.42

Correlation Coefficient

Premier Insurance  Synthetic Products

Very good diversification

The 3 months correlation between Premier and Synthetic is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Synthetic Products Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthetic Products 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 Synthetic Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthetic Products has no effect on the direction of Premier Insurance i.e., Premier Insurance and Synthetic Products go up and down completely randomly.

Pair Corralation between Premier Insurance and Synthetic Products

Assuming the 90 days trading horizon Premier Insurance is expected to under-perform the Synthetic Products. But the stock apears to be less risky and, when comparing its historical volatility, Premier Insurance is 1.17 times less risky than Synthetic Products. The stock trades about -0.02 of its potential returns per unit of risk. The Synthetic Products Enterprises is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,135  in Synthetic Products Enterprises on September 16, 2024 and sell it today you would earn a total of  387.00  from holding Synthetic Products Enterprises or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.46%
Values	Daily Returns

Premier Insurance  vs.  Synthetic Products Enterprises

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.

Synthetic Products

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetic Products Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Synthetic Products sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Synthetic Products

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

The idea behind Premier Insurance and Synthetic Products Enterprises 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.