Correlation Between Diligent Media and Life Insurance

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

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

Diversification Opportunities for Diligent Media and Life Insurance

0.72

Correlation Coefficient

Diligent Media  Life Insurance

Poor diversification

The 3 months correlation between Diligent and Life is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Diligent Media 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 Diligent Media are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Diligent Media i.e., Diligent Media and Life Insurance go up and down completely randomly.

Pair Corralation between Diligent Media and Life Insurance

Assuming the 90 days trading horizon Diligent Media is expected to generate 2.22 times more return on investment than Life Insurance. However, Diligent Media is 2.22 times more volatile than Life Insurance. It trades about -0.02 of its potential returns per unit of risk. Life Insurance is currently generating about -0.1 per unit of risk. If you would invest  597.00  in Diligent Media on September 14, 2024 and sell it today you would lose (47.00) from holding Diligent Media or give up 7.87% of portfolio value over 90 days.

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

Diligent Media  vs.  Life Insurance

Diligent Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diligent Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Diligent Media is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Diligent Media and Life Insurance

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

The idea behind Diligent Media and Life 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.