Correlation Between Reliance Insurance and Premier Insurance

Can any of the company-specific risk be diversified away by investing in both Reliance Insurance and Premier 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 Premier 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 Premier Insurance, you can compare the effects of market volatilities on Reliance Insurance and Premier 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 Premier Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Insurance and Premier Insurance.

Diversification Opportunities for Reliance Insurance and Premier Insurance

0.15

Correlation Coefficient

Reliance Insurance  Premier Insurance

Average diversification

The 3 months correlation between Reliance and Premier is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Insurance Co and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier 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 Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Reliance Insurance i.e., Reliance Insurance and Premier Insurance go up and down completely randomly.

Pair Corralation between Reliance Insurance and Premier Insurance

Assuming the 90 days trading horizon Reliance Insurance Co is expected to generate 1.34 times more return on investment than Premier Insurance. However, Reliance Insurance is 1.34 times more volatile than Premier Insurance. It trades about 0.01 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.1 per unit of risk. If you would invest  1,225  in Reliance Insurance Co on December 4, 2024 and sell it today you would lose (25.00) from holding Reliance Insurance Co or give up 2.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Reliance Insurance Co  vs.  Premier Insurance

Reliance Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reliance Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Premier Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Reliance Insurance and Premier Insurance

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

The idea behind Reliance Insurance Co and Premier 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 Commodity Directory module to find actively traded commodities issued by global exchanges.