Correlation Between Safety Insurance and Chiba Bank

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

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

Diversification Opportunities for Safety Insurance and Chiba Bank

0.8

Correlation Coefficient

Safety Insurance  Chiba Bank

Very poor diversification

The 3 months correlation between Safety and Chiba is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Safety 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 Safety Insurance Group are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Safety Insurance i.e., Safety Insurance and Chiba Bank go up and down completely randomly.

Pair Corralation between Safety Insurance and Chiba Bank

Assuming the 90 days horizon Safety Insurance is expected to generate 4.09 times less return on investment than Chiba Bank. But when comparing it to its historical volatility, Safety Insurance Group is 1.95 times less risky than Chiba Bank. It trades about 0.02 of its potential returns per unit of risk. Chiba Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  454.00  in Chiba Bank on October 6, 2024 and sell it today you would earn a total of  281.00  from holding Chiba Bank or generate 61.89% return on investment over 90 days.

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

Safety Insurance Group  vs.  Chiba Bank

Safety Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chiba Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chiba Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Safety Insurance and Chiba Bank

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

The idea behind Safety Insurance Group and Chiba Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.