Correlation Between Unity Foods and Premier Insurance
Can any of the company-specific risk be diversified away by investing in both Unity Foods and Premier Insurance 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 Unity Foods and Premier Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unity Foods and Premier Insurance, you can compare the effects of market volatilities on Unity Foods and Premier Insurance 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 Unity Foods with a short position of Premier Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Foods and Premier Insurance.
Diversification Opportunities for Unity Foods and Premier Insurance
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Unity and Premier is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Unity Foods and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance and Unity Foods 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 Unity Foods are associated (or correlated) with Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Unity Foods i.e., Unity Foods and Premier Insurance go up and down completely randomly.
Pair Corralation between Unity Foods and Premier Insurance
Assuming the 90 days trading horizon Unity Foods is expected to generate 0.53 times more return on investment than Premier Insurance. However, Unity Foods is 1.9 times less risky than Premier Insurance. It trades about 0.13 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.07 per unit of risk. If you would invest 2,571 in Unity Foods on August 24, 2024 and sell it today you would earn a total of 172.00 from holding Unity Foods or generate 6.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 78.26% |
| Values | Daily Returns |
Unity Foods vs. Premier Insurance
Performance |
| Timeline |
| Unity Foods |
| Premier Insurance |
Unity Foods and Premier Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unity Foods and Premier Insurance
The main advantage of trading using opposite Unity Foods and Premier Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Foods position performs unexpectedly, Premier Insurance 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 Premier Insurance will offset losses from the drop in Premier Insurance's long position.| Unity Foods vs. Masood Textile Mills | Unity Foods vs. Fauji Foods | Unity Foods vs. KSB Pumps | Unity Foods vs. Mari Petroleum |
| Premier Insurance vs. Adamjee Insurance | Premier Insurance vs. Atlas Insurance | Premier Insurance vs. Data Agro | Premier Insurance vs. 786 Investment Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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