Correlation Between Insignia Financial and EP Financial

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Can any of the company-specific risk be diversified away by investing in both Insignia Financial and EP Financial 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 Insignia Financial and EP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insignia Financial and EP Financial Group, you can compare the effects of market volatilities on Insignia Financial and EP Financial 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 Insignia Financial with a short position of EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insignia Financial and EP Financial.

Diversification Opportunities for Insignia Financial and EP Financial

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Insignia and EP1 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP Financial Group and Insignia Financial 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 Insignia Financial are associated (or correlated) with EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of Insignia Financial i.e., Insignia Financial and EP Financial go up and down completely randomly.

Pair Corralation between Insignia Financial and EP Financial

Assuming the 90 days trading horizon Insignia Financial is expected to generate 0.56 times more return on investment than EP Financial. However, Insignia Financial is 1.8 times less risky than EP Financial. It trades about 0.25 of its potential returns per unit of risk. EP Financial Group is currently generating about 0.07 per unit of risk. If you would invest  230.00  in Insignia Financial on September 5, 2024 and sell it today you would earn a total of  83.00  from holding Insignia Financial or generate 36.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

Insignia Financial  vs.  EP Financial Group

 Performance 
       Timeline  
Insignia Financial 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
EP Financial Group 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Insignia Financial and EP Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Insignia Financial and EP Financial

The main advantage of trading using opposite Insignia Financial and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insignia Financial position performs unexpectedly, EP Financial 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 EP Financial will offset losses from the drop in EP Financial's long position.
The idea behind Insignia Financial and EP Financial Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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