Correlation Between Pekin Life and Everest

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

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

Diversification Opportunities for Pekin Life and Everest

0.08

Correlation Coefficient

Pekin Life  Everest

Significant diversification

The 3 months correlation between Pekin and Everest is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group and Pekin Life 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 Pekin Life Insurance are associated (or correlated) with Everest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of Pekin Life i.e., Pekin Life and Everest go up and down completely randomly.

Pair Corralation between Pekin Life and Everest

Given the investment horizon of 90 days Pekin Life is expected to generate 3.57 times less return on investment than Everest. In addition to that, Pekin Life is 1.07 times more volatile than Everest Group. It trades about 0.01 of its total potential returns per unit of risk. Everest Group is currently generating about 0.03 per unit of volatility. If you would invest  32,058  in Everest Group on September 3, 2024 and sell it today you would earn a total of  6,698  from holding Everest Group or generate 20.89% return on investment over 90 days.

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

Pekin Life Insurance  vs.  Everest Group

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.

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everest Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Everest is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pekin Life and Everest

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

The idea behind Pekin Life Insurance and Everest 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.