Correlation Between General Insurance and PVR INOX

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

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

Diversification Opportunities for General Insurance and PVR INOX

0.37

Correlation Coefficient

General Insurance  PVR INOX

Weak diversification

The 3 months correlation between General and PVR is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and PVR INOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVR INOX 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 PVR INOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVR INOX has no effect on the direction of General Insurance i.e., General Insurance and PVR INOX go up and down completely randomly.

Pair Corralation between General Insurance and PVR INOX

Assuming the 90 days trading horizon General Insurance is expected to generate 1.18 times more return on investment than PVR INOX. However, General Insurance is 1.18 times more volatile than PVR INOX. It trades about 0.08 of its potential returns per unit of risk. PVR INOX is currently generating about -0.12 per unit of risk. If you would invest  39,500  in General Insurance on September 14, 2024 and sell it today you would earn a total of  3,545  from holding General Insurance or generate 8.97% return on investment over 90 days.

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

General Insurance  vs.  PVR INOX

General Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PVR INOX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVR INOX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with General Insurance and PVR INOX

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

The idea behind General Insurance and PVR INOX 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.