Correlation Between Premier Investments and Insignia Financial

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

By analyzing existing cross correlation between Premier Investments and Insignia Financial, you can compare the effects of market volatilities on Premier Investments and Insignia Financial 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 Investments with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Investments and Insignia Financial.

Diversification Opportunities for Premier Investments and Insignia Financial

0.54

Correlation Coefficient

Premier Investments  Insignia Financial

Very weak diversification

The 3 months correlation between Premier and Insignia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Premier Investments 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 Investments are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Premier Investments i.e., Premier Investments and Insignia Financial go up and down completely randomly.

Pair Corralation between Premier Investments and Insignia Financial

Assuming the 90 days trading horizon Premier Investments is expected to generate 4.41 times less return on investment than Insignia Financial. But when comparing it to its historical volatility, Premier Investments is 1.71 times less risky than Insignia Financial. It trades about 0.05 of its potential returns per unit of risk. Insignia Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  224.00  in Insignia Financial on September 29, 2024 and sell it today you would earn a total of  134.00  from holding Insignia Financial or generate 59.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Premier Investments  vs.  Insignia Financial

Premier Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Insignia Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Investments and Insignia Financial

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

The idea behind Premier Investments and Insignia Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.