Correlation Between Pacific Petroleum and Military Insurance

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

By analyzing existing cross correlation between Pacific Petroleum Transportation and Military Insurance Corp, you can compare the effects of market volatilities on Pacific Petroleum and Military 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 Pacific Petroleum with a short position of Military Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Petroleum and Military Insurance.

Diversification Opportunities for Pacific Petroleum and Military Insurance

0.12

Correlation Coefficient

Pacific Petroleum  Military Insurance

Average diversification

The 3 months correlation between Pacific and Military is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Military Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Military Insurance Corp and Pacific Petroleum 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 Pacific Petroleum Transportation are associated (or correlated) with Military Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Military Insurance Corp has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Military Insurance go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Military Insurance

Assuming the 90 days trading horizon Pacific Petroleum is expected to generate 1.98 times less return on investment than Military Insurance. But when comparing it to its historical volatility, Pacific Petroleum Transportation is 1.52 times less risky than Military Insurance. It trades about 0.05 of its potential returns per unit of risk. Military Insurance Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,645,000  in Military Insurance Corp on September 15, 2024 and sell it today you would earn a total of  100,000  from holding Military Insurance Corp or generate 6.08% return on investment over 90 days.

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

Pacific Petroleum Transportati  vs.  Military Insurance Corp

Pacific Petroleum

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Pacific Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Military Insurance Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Military Insurance Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Military Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pacific Petroleum and Military Insurance

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

The idea behind Pacific Petroleum Transportation and Military Insurance Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.