Correlation Between Insurance Portfolio and Financial Services
Can any of the company-specific risk be diversified away by investing in both Insurance Portfolio and Financial Services 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 Insurance Portfolio and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insurance Portfolio Insurance and Financial Services Portfolio, you can compare the effects of market volatilities on Insurance Portfolio and Financial Services 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 Insurance Portfolio with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Portfolio and Financial Services.
Diversification Opportunities for Insurance Portfolio and Financial Services
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Insurance and Financial is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Portfolio Insurance and Financial Services Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Insurance Portfolio 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 Insurance Portfolio Insurance are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Insurance Portfolio i.e., Insurance Portfolio and Financial Services go up and down completely randomly.
Pair Corralation between Insurance Portfolio and Financial Services
Assuming the 90 days horizon Insurance Portfolio Insurance is expected to under-perform the Financial Services. But the mutual fund apears to be less risky and, when comparing its historical volatility, Insurance Portfolio Insurance is 1.28 times less risky than Financial Services. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Financial Services Portfolio is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,494 in Financial Services Portfolio on October 26, 2024 and sell it today you would earn a total of 71.00 from holding Financial Services Portfolio or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Portfolio Insurance vs. Financial Services Portfolio
Performance |
| Timeline |
| Insurance Portfolio |
| Financial Services |
Insurance Portfolio and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Portfolio and Financial Services
The main advantage of trading using opposite Insurance Portfolio and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Portfolio position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.The idea behind Insurance Portfolio Insurance and Financial Services Portfolio 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.
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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