Correlation Between PVI Reinsurance and PV2 Investment

Can any of the company-specific risk be diversified away by investing in both PVI Reinsurance and PV2 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 PVI Reinsurance and PV2 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PVI Reinsurance Corp and PV2 Investment JSC, you can compare the effects of market volatilities on PVI Reinsurance and PV2 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 PVI Reinsurance with a short position of PV2 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PVI Reinsurance and PV2 Investment.

Diversification Opportunities for PVI Reinsurance and PV2 Investment

0.34

Correlation Coefficient

PVI Reinsurance  PV2 Investment

Weak diversification

The 3 months correlation between PVI and PV2 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding PVI Reinsurance Corp and PV2 Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PV2 Investment JSC and PVI Reinsurance 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 PVI Reinsurance Corp are associated (or correlated) with PV2 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PV2 Investment JSC has no effect on the direction of PVI Reinsurance i.e., PVI Reinsurance and PV2 Investment go up and down completely randomly.

Pair Corralation between PVI Reinsurance and PV2 Investment

Assuming the 90 days trading horizon PVI Reinsurance Corp is expected to generate 3.03 times more return on investment than PV2 Investment. However, PVI Reinsurance is 3.03 times more volatile than PV2 Investment JSC. It trades about 0.18 of its potential returns per unit of risk. PV2 Investment JSC is currently generating about 0.23 per unit of risk. If you would invest  1,840,000  in PVI Reinsurance Corp on October 8, 2024 and sell it today you would earn a total of  170,000  from holding PVI Reinsurance Corp or generate 9.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

PVI Reinsurance Corp  vs.  PV2 Investment JSC

PVI Reinsurance Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, PVI Reinsurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PV2 Investment JSC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PV2 Investment JSC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PV2 Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PVI Reinsurance and PV2 Investment

The main advantage of trading using opposite PVI Reinsurance and PV2 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PVI Reinsurance position performs unexpectedly, PV2 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 PV2 Investment will offset losses from the drop in PV2 Investment's long position.

The idea behind PVI Reinsurance Corp and PV2 Investment JSC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.