Correlation Between Central Bank and General Insurance

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

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

Diversification Opportunities for Central Bank and General Insurance

0.79

Correlation Coefficient

Central Bank  General Insurance

Poor diversification

The 3 months correlation between Central and General is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Central Bank of and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Central Bank 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 Central Bank of are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Central Bank i.e., Central Bank and General Insurance go up and down completely randomly.

Pair Corralation between Central Bank and General Insurance

Assuming the 90 days trading horizon Central Bank of is expected to under-perform the General Insurance. In addition to that, Central Bank is 1.06 times more volatile than General Insurance. It trades about -0.04 of its total potential returns per unit of risk. General Insurance is currently generating about -0.01 per unit of volatility. If you would invest  41,155  in General Insurance on September 2, 2024 and sell it today you would lose (1,195) from holding General Insurance or give up 2.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Central Bank of  vs.  General Insurance

Central Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

General Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, General Insurance is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Central Bank and General Insurance

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

The idea behind Central Bank of and General Insurance 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.