Correlation Between Big Bird and Premier Insurance
Can any of the company-specific risk be diversified away by investing in both Big Bird and Premier 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 Big Bird and Premier Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Bird Foods and Premier Insurance, you can compare the effects of market volatilities on Big Bird and Premier 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 Big Bird with a short position of Premier Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Premier Insurance.
Diversification Opportunities for Big Bird and Premier Insurance
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Big and Premier is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance and Big Bird 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 Big Bird Foods are associated (or correlated) with Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Big Bird i.e., Big Bird and Premier Insurance go up and down completely randomly.
Pair Corralation between Big Bird and Premier Insurance
Assuming the 90 days trading horizon Big Bird Foods is expected to under-perform the Premier Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Big Bird Foods is 1.33 times less risky than Premier Insurance. The stock trades about -0.18 of its potential returns per unit of risk. The Premier Insurance is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 606.00 in Premier Insurance on August 28, 2024 and sell it today you would lose (48.00) from holding Premier Insurance or give up 7.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Big Bird Foods vs. Premier Insurance
Performance |
| Timeline |
| Big Bird Foods |
| Premier Insurance |
Big Bird and Premier Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Bird and Premier Insurance
The main advantage of trading using opposite Big Bird and Premier Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird position performs unexpectedly, Premier 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 Premier Insurance will offset losses from the drop in Premier Insurance's long position.| Big Bird vs. Habib Insurance | Big Bird vs. Century Insurance | Big Bird vs. Reliance Weaving Mills | Big Bird vs. Media Times |
| Premier Insurance vs. Adamjee Insurance | Premier Insurance vs. Unilever Pakistan Foods | Premier Insurance vs. United Insurance | Premier Insurance vs. Reliance Insurance 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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