Correlation Between Prime Financial and Insignia Financial
Can any of the company-specific risk be diversified away by investing in both Prime Financial and Insignia Financial 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 Prime Financial and Insignia Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Financial Group and Insignia Financial, you can compare the effects of market volatilities on Prime Financial and Insignia Financial 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 Prime Financial with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and Insignia Financial.
Diversification Opportunities for Prime Financial and Insignia Financial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prime and Insignia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Prime Financial 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 Prime Financial Group are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Prime Financial i.e., Prime Financial and Insignia Financial go up and down completely randomly.
Pair Corralation between Prime Financial and Insignia Financial
Assuming the 90 days trading horizon Prime Financial Group is expected to generate 1.23 times more return on investment than Insignia Financial. However, Prime Financial is 1.23 times more volatile than Insignia Financial. It trades about -0.08 of its potential returns per unit of risk. Insignia Financial is currently generating about -0.13 per unit of risk. If you would invest 23.00 in Prime Financial Group on September 1, 2024 and sell it today you would lose (1.00) from holding Prime Financial Group or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Financial Group vs. Insignia Financial
Performance |
| Timeline |
| Prime Financial Group |
| Insignia Financial |
Prime Financial and Insignia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Financial and Insignia Financial
The main advantage of trading using opposite Prime Financial and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Financial position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.| Prime Financial vs. WA1 Resources | Prime Financial vs. Predictive Discovery | Prime Financial vs. Cooper Metals | Prime Financial vs. OD6 Metals |
| Insignia Financial vs. Retail Food Group | Insignia Financial vs. Clime Investment Management | Insignia Financial vs. Diversified United Investment | Insignia Financial vs. Duxton Broadacre Farms |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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