Correlation Between First Insurance and Yuanta Financial
Can any of the company-specific risk be diversified away by investing in both First Insurance and Yuanta Financial 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 First Insurance and Yuanta Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Insurance Co and Yuanta Financial Holdings, you can compare the effects of market volatilities on First Insurance and Yuanta Financial 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 First Insurance with a short position of Yuanta Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Insurance and Yuanta Financial.
Diversification Opportunities for First Insurance and Yuanta Financial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Yuanta is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Yuanta Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Financial Holdings and First 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 First Insurance Co are associated (or correlated) with Yuanta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Financial Holdings has no effect on the direction of First Insurance i.e., First Insurance and Yuanta Financial go up and down completely randomly.
Pair Corralation between First Insurance and Yuanta Financial
Assuming the 90 days trading horizon First Insurance Co is expected to generate 0.91 times more return on investment than Yuanta Financial. However, First Insurance Co is 1.1 times less risky than Yuanta Financial. It trades about 0.35 of its potential returns per unit of risk. Yuanta Financial Holdings is currently generating about 0.15 per unit of risk. If you would invest 2,295 in First Insurance Co on September 2, 2024 and sell it today you would earn a total of 190.00 from holding First Insurance Co or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Insurance Co vs. Yuanta Financial Holdings
Performance |
| Timeline |
| First Insurance |
| Yuanta Financial Holdings |
First Insurance and Yuanta Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Insurance and Yuanta Financial
The main advantage of trading using opposite First Insurance and Yuanta Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Insurance position performs unexpectedly, Yuanta Financial 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 Yuanta Financial will offset losses from the drop in Yuanta Financial's long position.The idea behind First Insurance Co and Yuanta Financial Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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