Correlation Between Reliance Insurance and Atlas Insurance

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

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

Diversification Opportunities for Reliance Insurance and Atlas Insurance

0.83

Correlation Coefficient

Reliance Insurance  Atlas Insurance

Very poor diversification

The 3 months correlation between Reliance and Atlas is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Insurance Co and Atlas Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Insurance and Reliance 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 Reliance Insurance Co are associated (or correlated) with Atlas Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Insurance has no effect on the direction of Reliance Insurance i.e., Reliance Insurance and Atlas Insurance go up and down completely randomly.

Pair Corralation between Reliance Insurance and Atlas Insurance

Assuming the 90 days trading horizon Reliance Insurance Co is expected to generate 2.65 times more return on investment than Atlas Insurance. However, Reliance Insurance is 2.65 times more volatile than Atlas Insurance. It trades about 0.07 of its potential returns per unit of risk. Atlas Insurance is currently generating about 0.11 per unit of risk. If you would invest  571.00  in Reliance Insurance Co on October 26, 2024 and sell it today you would earn a total of  666.00  from holding Reliance Insurance Co or generate 116.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	75.06%
Values	Daily Returns

Reliance Insurance Co  vs.  Atlas Insurance

Reliance Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Insurance Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Reliance Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Atlas Insurance

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Insurance are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atlas Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Insurance and Atlas Insurance

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

The idea behind Reliance Insurance Co and Atlas Insurance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.