Correlation Between Ecclesiastical Insurance and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Ecclesiastical Insurance and Polar Capital 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 Ecclesiastical Insurance and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecclesiastical Insurance Office and Polar Capital Technology, you can compare the effects of market volatilities on Ecclesiastical Insurance and Polar Capital 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 Ecclesiastical Insurance with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecclesiastical Insurance and Polar Capital.
Diversification Opportunities for Ecclesiastical Insurance and Polar Capital
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ecclesiastical and Polar is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ecclesiastical Insurance Offic and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and Ecclesiastical 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 Ecclesiastical Insurance Office are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Ecclesiastical Insurance i.e., Ecclesiastical Insurance and Polar Capital go up and down completely randomly.
Pair Corralation between Ecclesiastical Insurance and Polar Capital
Assuming the 90 days trading horizon Ecclesiastical Insurance is expected to generate 5.4 times less return on investment than Polar Capital. But when comparing it to its historical volatility, Ecclesiastical Insurance Office is 1.65 times less risky than Polar Capital. It trades about 0.04 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 30,350 in Polar Capital Technology on October 26, 2024 and sell it today you would earn a total of 7,800 from holding Polar Capital Technology or generate 25.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecclesiastical Insurance Offic vs. Polar Capital Technology
Performance |
| Timeline |
| Ecclesiastical Insurance |
| Polar Capital Technology |
Ecclesiastical Insurance and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecclesiastical Insurance and Polar Capital
The main advantage of trading using opposite Ecclesiastical Insurance and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecclesiastical Insurance position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.The idea behind Ecclesiastical Insurance Office and Polar Capital Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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