Correlation Between Premier Insurance and International Steels
Can any of the company-specific risk be diversified away by investing in both Premier Insurance and International Steels 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 Premier Insurance and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Insurance and International Steels, you can compare the effects of market volatilities on Premier Insurance and International Steels 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 Premier Insurance with a short position of International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Insurance and International Steels.
Diversification Opportunities for Premier Insurance and International Steels
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Premier and International is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels and Premier 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 Premier Insurance are associated (or correlated) with International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Premier Insurance i.e., Premier Insurance and International Steels go up and down completely randomly.
Pair Corralation between Premier Insurance and International Steels
Assuming the 90 days trading horizon Premier Insurance is expected to generate 1.73 times less return on investment than International Steels. In addition to that, Premier Insurance is 2.34 times more volatile than International Steels. It trades about 0.01 of its total potential returns per unit of risk. International Steels is currently generating about 0.05 per unit of volatility. If you would invest 6,841 in International Steels on September 5, 2024 and sell it today you would earn a total of 1,628 from holding International Steels or generate 23.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 74.27% |
| Values | Daily Returns |
Premier Insurance vs. International Steels
Performance |
| Timeline |
| Premier Insurance |
| International Steels |
Premier Insurance and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Insurance and International Steels
The main advantage of trading using opposite Premier Insurance and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Insurance position performs unexpectedly, International Steels 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 International Steels will offset losses from the drop in International Steels' long position.| Premier Insurance vs. Oil and Gas | Premier Insurance vs. Pakistan State Oil | Premier Insurance vs. Pakistan Petroleum | Premier Insurance vs. Fauji Fertilizer |
| International Steels vs. Masood Textile Mills | International Steels vs. Fauji Foods | International Steels vs. KSB Pumps | International Steels vs. Mari Petroleum |
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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