Correlation Between CORONATION INSURANCE and LIVINGTRUST MORTGAGE

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

By analyzing existing cross correlation between CORONATION INSURANCE PLC and LIVINGTRUST MORTGAGE BANK, you can compare the effects of market volatilities on CORONATION INSURANCE and LIVINGTRUST MORTGAGE 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 CORONATION INSURANCE with a short position of LIVINGTRUST MORTGAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CORONATION INSURANCE and LIVINGTRUST MORTGAGE.

Diversification Opportunities for CORONATION INSURANCE and LIVINGTRUST MORTGAGE

0.84

Correlation Coefficient

CORONATION INSURANCE  LIVINGTRUST MORTGAGE

Very poor diversification

The 3 months correlation between CORONATION and LIVINGTRUST is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CORONATION INSURANCE PLC and LIVINGTRUST MORTGAGE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVINGTRUST MORTGAGE BANK and CORONATION 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 CORONATION INSURANCE PLC are associated (or correlated) with LIVINGTRUST MORTGAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVINGTRUST MORTGAGE BANK has no effect on the direction of CORONATION INSURANCE i.e., CORONATION INSURANCE and LIVINGTRUST MORTGAGE go up and down completely randomly.

Pair Corralation between CORONATION INSURANCE and LIVINGTRUST MORTGAGE

Assuming the 90 days trading horizon CORONATION INSURANCE PLC is expected to generate 1.58 times more return on investment than LIVINGTRUST MORTGAGE. However, CORONATION INSURANCE is 1.58 times more volatile than LIVINGTRUST MORTGAGE BANK. It trades about 0.6 of its potential returns per unit of risk. LIVINGTRUST MORTGAGE BANK is currently generating about 0.33 per unit of risk. If you would invest  99.00  in CORONATION INSURANCE PLC on October 9, 2024 and sell it today you would earn a total of  199.00  from holding CORONATION INSURANCE PLC or generate 201.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.5%
Values	Daily Returns

CORONATION INSURANCE PLC  vs.  LIVINGTRUST MORTGAGE BANK

CORONATION INSURANCE PLC

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CORONATION INSURANCE PLC are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, CORONATION INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

LIVINGTRUST MORTGAGE BANK

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LIVINGTRUST MORTGAGE BANK are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, LIVINGTRUST MORTGAGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CORONATION INSURANCE and LIVINGTRUST MORTGAGE

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

The idea behind CORONATION INSURANCE PLC and LIVINGTRUST MORTGAGE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.