Correlation Between General Insurance and Central Bank

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

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

Diversification Opportunities for General Insurance and Central Bank

0.79

Correlation Coefficient

General Insurance  Central Bank

Poor diversification

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

Pair Corralation between General Insurance and Central Bank

Assuming the 90 days trading horizon General Insurance is expected to generate 0.94 times more return on investment than Central Bank. However, General Insurance is 1.06 times less risky than Central Bank. It trades about -0.01 of its potential returns per unit of risk. Central Bank of is currently generating about -0.04 per unit of risk. 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

General Insurance  vs.  Central Bank of

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.

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.

Pair Trading with General Insurance and Central Bank

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

The idea behind General Insurance and Central Bank of 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.