Correlation Between Pekin Life and Alumina

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

By analyzing existing cross correlation between Pekin Life Insurance and Alumina Limited, you can compare the effects of market volatilities on Pekin Life and Alumina 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 Pekin Life with a short position of Alumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pekin Life and Alumina.

Diversification Opportunities for Pekin Life and Alumina

0.3

Correlation Coefficient

Pekin Life  Alumina

Weak diversification

The 3 months correlation between Pekin and Alumina is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited and Pekin Life 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 Pekin Life Insurance are associated (or correlated) with Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Pekin Life i.e., Pekin Life and Alumina go up and down completely randomly.

Pair Corralation between Pekin Life and Alumina

If you would invest  1,150  in Pekin Life Insurance on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Pekin Life Insurance or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.64%
Values	Daily Returns

Pekin Life Insurance  vs.  Alumina Limited

Pekin Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pekin Life and Alumina

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

The idea behind Pekin Life Insurance and Alumina Limited 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 Stocks Directory module to find actively traded stocks across global markets.