Correlation Between BHCCN and Life Insurance

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

By analyzing existing cross correlation between BHCCN 14 15 OCT 30 and Life Insurance, you can compare the effects of market volatilities on BHCCN and Life 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 BHCCN with a short position of Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHCCN and Life Insurance.

Diversification Opportunities for BHCCN and Life Insurance

0.04

Correlation Coefficient

BHCCN  Life Insurance

Significant diversification

The 3 months correlation between BHCCN and Life is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BHCCN 14 15 OCT 30 and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and BHCCN 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 BHCCN 14 15 OCT 30 are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of BHCCN i.e., BHCCN and Life Insurance go up and down completely randomly.

Pair Corralation between BHCCN and Life Insurance

Assuming the 90 days trading horizon BHCCN 14 15 OCT 30 is expected to generate 0.94 times more return on investment than Life Insurance. However, BHCCN 14 15 OCT 30 is 1.07 times less risky than Life Insurance. It trades about 0.04 of its potential returns per unit of risk. Life Insurance is currently generating about -0.08 per unit of risk. If you would invest  6,550  in BHCCN 14 15 OCT 30 on October 11, 2024 and sell it today you would earn a total of  1,318  from holding BHCCN 14 15 OCT 30 or generate 20.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.25%
Values	Daily Returns

BHCCN 14 15 OCT 30  vs.  Life Insurance

BHCCN 14 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHCCN 14 15 OCT 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for BHCCN 14 15 OCT 30 investors.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BHCCN and Life Insurance

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

The idea behind BHCCN 14 15 OCT 30 and Life 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.