Correlation Between ICC Holdings and Pekin Life

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

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

Diversification Opportunities for ICC Holdings and Pekin Life

0.47

Correlation Coefficient

ICC Holdings  Pekin Life

Very weak diversification

The 3 months correlation between ICC and Pekin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ICC Holdings and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance and ICC Holdings 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 ICC Holdings are associated (or correlated) with Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of ICC Holdings i.e., ICC Holdings and Pekin Life go up and down completely randomly.

Pair Corralation between ICC Holdings and Pekin Life

Given the investment horizon of 90 days ICC Holdings is expected to generate 539.78 times more return on investment than Pekin Life. However, ICC Holdings is 539.78 times more volatile than Pekin Life Insurance. It trades about 0.07 of its potential returns per unit of risk. Pekin Life Insurance is currently generating about 0.06 per unit of risk. If you would invest  1,600  in ICC Holdings on September 13, 2024 and sell it today you would earn a total of  722.00  from holding ICC Holdings or generate 45.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.44%
Values	Daily Returns

ICC Holdings  vs.  Pekin Life Insurance

ICC Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ICC Holdings and Pekin Life

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

The idea behind ICC Holdings and Pekin 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.