Correlation Between Arima Communications and First Insurance
Can any of the company-specific risk be diversified away by investing in both Arima Communications 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 Arima Communications and First Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arima Communications Corp and First Insurance Co, you can compare the effects of market volatilities on Arima Communications 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 Arima Communications with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and First Insurance.
Diversification Opportunities for Arima Communications and First Insurance
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arima and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and Arima Communications 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 Arima Communications Corp 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 Arima Communications i.e., Arima Communications and First Insurance go up and down completely randomly.
Pair Corralation between Arima Communications and First Insurance
Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 9.13 times more return on investment than First Insurance. However, Arima Communications is 9.13 times more volatile than First Insurance Co. It trades about 0.64 of its potential returns per unit of risk. First Insurance Co is currently generating about 0.29 per unit of risk. If you would invest 950.00 in Arima Communications Corp on September 13, 2024 and sell it today you would earn a total of 1,490 from holding Arima Communications Corp or generate 156.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arima Communications Corp vs. First Insurance Co
Performance |
| Timeline |
| Arima Communications Corp |
| First Insurance |
Arima Communications and First Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arima Communications and First Insurance
The main advantage of trading using opposite Arima Communications and First Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arima Communications 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.| Arima Communications vs. AU Optronics | Arima Communications vs. Innolux Corp | Arima Communications vs. Ruentex Development Co | Arima Communications vs. WiseChip Semiconductor |
| First Insurance vs. Central Reinsurance Corp | First Insurance vs. Huaku Development Co | First Insurance vs. Fubon Financial Holding | First Insurance vs. Chailease Holding Co |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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