Correlation Between CORONATION INSURANCE and VETIVA S

Can any of the company-specific risk be diversified away by investing in both CORONATION INSURANCE and VETIVA S 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 VETIVA S 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 VETIVA S P, you can compare the effects of market volatilities on CORONATION INSURANCE and VETIVA S 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 VETIVA S. Check out your portfolio center. Please also check ongoing floating volatility patterns of CORONATION INSURANCE and VETIVA S.

Diversification Opportunities for CORONATION INSURANCE and VETIVA S

0.06

Correlation Coefficient

CORONATION INSURANCE  VETIVA S

Significant diversification

The 3 months correlation between CORONATION and VETIVA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CORONATION INSURANCE PLC and VETIVA S P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA S P 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 VETIVA S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA S P has no effect on the direction of CORONATION INSURANCE i.e., CORONATION INSURANCE and VETIVA S go up and down completely randomly.

Pair Corralation between CORONATION INSURANCE and VETIVA S

Assuming the 90 days trading horizon CORONATION INSURANCE is expected to generate 31.14 times less return on investment than VETIVA S. But when comparing it to its historical volatility, CORONATION INSURANCE PLC is 33.78 times less risky than VETIVA S. It trades about 0.17 of its potential returns per unit of risk. VETIVA S P is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  20,300  in VETIVA S P on September 13, 2024 and sell it today you would lose (2,000) from holding VETIVA S P or give up 9.85% of portfolio value over 90 days.

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

CORONATION INSURANCE PLC  vs.  VETIVA S P

CORONATION INSURANCE PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CORONATION INSURANCE PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, CORONATION INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

VETIVA S P

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA S P are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, VETIVA S exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CORONATION INSURANCE and VETIVA S

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

The idea behind CORONATION INSURANCE PLC and VETIVA S P 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.