Correlation Between Nigerian Stock and AXAMANSARD INSURANCE

Can any of the company-specific risk be diversified away by investing in both Nigerian Stock and AXAMANSARD INSURANCE 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 Nigerian Stock and AXAMANSARD INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nigerian Stock Exchange and AXAMANSARD INSURANCE PLC, you can compare the effects of market volatilities on Nigerian Stock and AXAMANSARD INSURANCE 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 Nigerian Stock with a short position of AXAMANSARD INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nigerian Stock and AXAMANSARD INSURANCE.

Diversification Opportunities for Nigerian Stock and AXAMANSARD INSURANCE

0.01

Correlation Coefficient

Nigerian Stock  AXAMANSARD INSURANCE

Significant diversification

The 3 months correlation between Nigerian and AXAMANSARD is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nigerian Stock Exchange and AXAMANSARD INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXAMANSARD INSURANCE PLC and Nigerian Stock 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 Nigerian Stock Exchange are associated (or correlated) with AXAMANSARD INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXAMANSARD INSURANCE PLC has no effect on the direction of Nigerian Stock i.e., Nigerian Stock and AXAMANSARD INSURANCE go up and down completely randomly.

Pair Corralation between Nigerian Stock and AXAMANSARD INSURANCE

Assuming the 90 days trading horizon Nigerian Stock is expected to generate 2.25 times less return on investment than AXAMANSARD INSURANCE. But when comparing it to its historical volatility, Nigerian Stock Exchange is 3.85 times less risky than AXAMANSARD INSURANCE. It trades about 0.17 of its potential returns per unit of risk. AXAMANSARD INSURANCE PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  196.00  in AXAMANSARD INSURANCE PLC on September 14, 2024 and sell it today you would earn a total of  545.00  from holding AXAMANSARD INSURANCE PLC or generate 278.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Nigerian Stock Exchange  vs.  AXAMANSARD INSURANCE PLC

Pair Trading with Nigerian Stock and AXAMANSARD INSURANCE

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

The idea behind Nigerian Stock Exchange and AXAMANSARD INSURANCE PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.