Correlation Between Financial Services and Insurance Portfolio
Can any of the company-specific risk be diversified away by investing in both Financial Services and Insurance Portfolio 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 Financial Services and Insurance Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Services Portfolio and Insurance Portfolio Insurance, you can compare the effects of market volatilities on Financial Services and Insurance Portfolio 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 Financial Services with a short position of Insurance Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and Insurance Portfolio.
Diversification Opportunities for Financial Services and Insurance Portfolio
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and Insurance is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Portfolio and Insurance Portfolio Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Portfolio and Financial Services 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 Financial Services Portfolio are associated (or correlated) with Insurance Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Portfolio has no effect on the direction of Financial Services i.e., Financial Services and Insurance Portfolio go up and down completely randomly.
Pair Corralation between Financial Services and Insurance Portfolio
Assuming the 90 days horizon Financial Services Portfolio is expected to generate 1.19 times more return on investment than Insurance Portfolio. However, Financial Services is 1.19 times more volatile than Insurance Portfolio Insurance. It trades about 0.09 of its potential returns per unit of risk. Insurance Portfolio Insurance is currently generating about 0.08 per unit of risk. If you would invest 1,040 in Financial Services Portfolio on August 30, 2024 and sell it today you would earn a total of 625.00 from holding Financial Services Portfolio or generate 60.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Services Portfolio vs. Insurance Portfolio Insurance
Performance |
| Timeline |
| Financial Services |
| Insurance Portfolio |
Financial Services and Insurance Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and Insurance Portfolio
The main advantage of trading using opposite Financial Services and Insurance Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, Insurance Portfolio 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 Insurance Portfolio will offset losses from the drop in Insurance Portfolio's long position.| Financial Services vs. HUMANA INC | Financial Services vs. Aquagold International | Financial Services vs. Barloworld Ltd ADR | Financial Services vs. Morningstar Unconstrained Allocation |
| Insurance Portfolio vs. HUMANA INC | Insurance Portfolio vs. Aquagold International | Insurance Portfolio vs. Barloworld Ltd ADR | Insurance Portfolio vs. Morningstar Unconstrained Allocation |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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