Correlation Between Victoria Insurance and Sona Topas

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

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

Diversification Opportunities for Victoria Insurance and Sona Topas

0.03

Correlation Coefficient

Victoria Insurance  Sona Topas

Significant diversification

The 3 months correlation between Victoria and Sona is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Victoria Insurance Tbk and Sona Topas Tourism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sona Topas Tourism and Victoria 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 Victoria Insurance Tbk are associated (or correlated) with Sona Topas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sona Topas Tourism has no effect on the direction of Victoria Insurance i.e., Victoria Insurance and Sona Topas go up and down completely randomly.

Pair Corralation between Victoria Insurance and Sona Topas

Assuming the 90 days trading horizon Victoria Insurance Tbk is expected to under-perform the Sona Topas. But the stock apears to be less risky and, when comparing its historical volatility, Victoria Insurance Tbk is 6.04 times less risky than Sona Topas. The stock trades about -0.04 of its potential returns per unit of risk. The Sona Topas Tourism is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  419,000  in Sona Topas Tourism on December 30, 2024 and sell it today you would lose (48,000) from holding Sona Topas Tourism or give up 11.46% of portfolio value over 90 days.

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

Victoria Insurance Tbk  vs.  Sona Topas Tourism

Victoria Insurance Tbk

Risk-Adjusted Performance

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 quite persistent forward-looking signals, Victoria Insurance is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sona Topas Tourism

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Victoria Insurance and Sona Topas

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

The idea behind Victoria Insurance Tbk and Sona Topas Tourism 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.