Correlation Between Security Investment and Crescent Star

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

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

Diversification Opportunities for Security Investment and Crescent Star

0.02

Correlation Coefficient

Security Investment  Crescent Star

Significant diversification

The 3 months correlation between Security and Crescent is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Security Investment Bank and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and Security Investment 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 Security Investment Bank are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Security Investment i.e., Security Investment and Crescent Star go up and down completely randomly.

Pair Corralation between Security Investment and Crescent Star

Assuming the 90 days trading horizon Security Investment Bank is expected to under-perform the Crescent Star. But the stock apears to be less risky and, when comparing its historical volatility, Security Investment Bank is 1.7 times less risky than Crescent Star. The stock trades about -0.07 of its potential returns per unit of risk. The Crescent Star Insurance is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Crescent Star Insurance on September 17, 2024 and sell it today you would earn a total of  30.00  from holding Crescent Star Insurance or generate 10.71% return on investment over 90 days.

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

Security Investment Bank  vs.  Crescent Star Insurance

Security Investment Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Security Investment Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Security Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Crescent Star Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Security Investment and Crescent Star

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

The idea behind Security Investment Bank and Crescent Star 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.