Correlation Between Century Insurance and Escorts Investment

Can any of the company-specific risk be diversified away by investing in both Century Insurance and Escorts Investment 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 Century Insurance and Escorts Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Insurance and Escorts Investment Bank, you can compare the effects of market volatilities on Century Insurance and Escorts Investment 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 Century Insurance with a short position of Escorts Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Escorts Investment.

Diversification Opportunities for Century Insurance and Escorts Investment

-0.29

Correlation Coefficient

Century Insurance  Escorts Investment

Very good diversification

The 3 months correlation between Century and Escorts is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Escorts Investment Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escorts Investment Bank and Century 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 Century Insurance are associated (or correlated) with Escorts Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escorts Investment Bank has no effect on the direction of Century Insurance i.e., Century Insurance and Escorts Investment go up and down completely randomly.

Pair Corralation between Century Insurance and Escorts Investment

Assuming the 90 days trading horizon Century Insurance is expected to generate 0.45 times more return on investment than Escorts Investment. However, Century Insurance is 2.21 times less risky than Escorts Investment. It trades about 0.21 of its potential returns per unit of risk. Escorts Investment Bank is currently generating about 0.08 per unit of risk. If you would invest  2,797  in Century Insurance on August 30, 2024 and sell it today you would earn a total of  923.00  from holding Century Insurance or generate 33.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Century Insurance  vs.  Escorts Investment Bank

Century Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Escorts Investment Bank

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Escorts Investment Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Escorts Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Insurance and Escorts Investment

The main advantage of trading using opposite Century Insurance and Escorts Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Escorts Investment 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 Escorts Investment will offset losses from the drop in Escorts Investment's long position.

The idea behind Century Insurance and Escorts Investment Bank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.