Correlation Between General Insurance and BAG Films

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

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

Diversification Opportunities for General Insurance and BAG Films

0.3

Correlation Coefficient

General Insurance  BAG Films

Weak diversification

The 3 months correlation between General and BAG is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films and General 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 General Insurance are associated (or correlated) with BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of General Insurance i.e., General Insurance and BAG Films go up and down completely randomly.

Pair Corralation between General Insurance and BAG Films

Assuming the 90 days trading horizon General Insurance is expected to generate 0.81 times more return on investment than BAG Films. However, General Insurance is 1.23 times less risky than BAG Films. It trades about 0.08 of its potential returns per unit of risk. BAG Films and is currently generating about 0.05 per unit of risk. If you would invest  30,028  in General Insurance on September 24, 2024 and sell it today you would earn a total of  20,072  from holding General Insurance or generate 66.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.18%
Values	Daily Returns

General Insurance  vs.  BAG Films and

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

BAG Films

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BAG Films and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, BAG Films displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Insurance and BAG Films

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

The idea behind General Insurance and BAG Films and 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.