Correlation Between Military Insurance and Damsan JSC
Can any of the company-specific risk be diversified away by investing in both Military Insurance and Damsan JSC 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 Military Insurance and Damsan JSC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Military Insurance Corp and Damsan JSC, you can compare the effects of market volatilities on Military Insurance and Damsan JSC 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 Military Insurance with a short position of Damsan JSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Military Insurance and Damsan JSC.
Diversification Opportunities for Military Insurance and Damsan JSC
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Military and Damsan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Military Insurance Corp and Damsan JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damsan JSC and Military 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 Military Insurance Corp are associated (or correlated) with Damsan JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damsan JSC has no effect on the direction of Military Insurance i.e., Military Insurance and Damsan JSC go up and down completely randomly.
Pair Corralation between Military Insurance and Damsan JSC
Assuming the 90 days trading horizon Military Insurance Corp is expected to generate 1.13 times more return on investment than Damsan JSC. However, Military Insurance is 1.13 times more volatile than Damsan JSC. It trades about -0.09 of its potential returns per unit of risk. Damsan JSC is currently generating about -0.17 per unit of risk. If you would invest 1,810,000 in Military Insurance Corp on October 30, 2024 and sell it today you would lose (120,000) from holding Military Insurance Corp or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Military Insurance Corp vs. Damsan JSC
Performance |
| Timeline |
| Military Insurance Corp |
| Damsan JSC |
Military Insurance and Damsan JSC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Military Insurance and Damsan JSC
The main advantage of trading using opposite Military Insurance and Damsan JSC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Military Insurance position performs unexpectedly, Damsan JSC 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 Damsan JSC will offset losses from the drop in Damsan JSC's long position.The idea behind Military Insurance Corp and Damsan JSC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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