Correlation Between Trust Finance and Victoria Insurance

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

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

Diversification Opportunities for Trust Finance and Victoria Insurance

-0.82

Correlation Coefficient

Trust Finance  Victoria Insurance

Pay attention - limited upside

The 3 months correlation between Trust and Victoria is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Trust Finance Indonesia and Victoria Insurance Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victoria Insurance Tbk and Trust Finance 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 Trust Finance Indonesia are associated (or correlated) with Victoria Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victoria Insurance Tbk has no effect on the direction of Trust Finance i.e., Trust Finance and Victoria Insurance go up and down completely randomly.

Pair Corralation between Trust Finance and Victoria Insurance

Assuming the 90 days trading horizon Trust Finance Indonesia is expected to generate 2.48 times more return on investment than Victoria Insurance. However, Trust Finance is 2.48 times more volatile than Victoria Insurance Tbk. It trades about 0.21 of its potential returns per unit of risk. Victoria Insurance Tbk is currently generating about -0.1 per unit of risk. If you would invest  87,000  in Trust Finance Indonesia on October 22, 2024 and sell it today you would earn a total of  12,000  from holding Trust Finance Indonesia or generate 13.79% return on investment over 90 days.

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

Trust Finance Indonesia  vs.  Victoria Insurance Tbk

Trust Finance Indonesia

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trust Finance Indonesia are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Trust Finance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Victoria Insurance Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victoria Insurance Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Trust Finance and Victoria Insurance

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

The idea behind Trust Finance Indonesia and Victoria Insurance Tbk 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.