Correlation Between Sporton International and First Insurance
Can any of the company-specific risk be diversified away by investing in both Sporton International and First 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 Sporton International and First Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sporton International and First Insurance Co, you can compare the effects of market volatilities on Sporton International and First 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 Sporton International with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sporton International and First Insurance.
Diversification Opportunities for Sporton International and First Insurance
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sporton and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sporton International and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and Sporton International 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 Sporton International are associated (or correlated) with First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of Sporton International i.e., Sporton International and First Insurance go up and down completely randomly.
Pair Corralation between Sporton International and First Insurance
Assuming the 90 days trading horizon Sporton International is expected to under-perform the First Insurance. In addition to that, Sporton International is 1.17 times more volatile than First Insurance Co. It trades about -0.06 of its total potential returns per unit of risk. First Insurance Co is currently generating about 0.01 per unit of volatility. If you would invest 2,495 in First Insurance Co on September 3, 2024 and sell it today you would lose (10.00) from holding First Insurance Co or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sporton International vs. First Insurance Co
Performance |
| Timeline |
| Sporton International |
| First Insurance |
Sporton International and First Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sporton International and First Insurance
The main advantage of trading using opposite Sporton International and First Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sporton International position performs unexpectedly, First 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 First Insurance will offset losses from the drop in First Insurance's long position.The idea behind Sporton International and First Insurance Co 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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