Correlation Between Action Construction and General Insurance

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

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

Diversification Opportunities for Action Construction and General Insurance

0.57

Correlation Coefficient

Action Construction  General Insurance

Very weak diversification

The 3 months correlation between Action and General is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Action Construction Equipment and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Action Construction 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 Action Construction Equipment are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Action Construction i.e., Action Construction and General Insurance go up and down completely randomly.

Pair Corralation between Action Construction and General Insurance

Assuming the 90 days trading horizon Action Construction Equipment is expected to generate 1.1 times more return on investment than General Insurance. However, Action Construction is 1.1 times more volatile than General Insurance. It trades about -0.07 of its potential returns per unit of risk. General Insurance is currently generating about -0.1 per unit of risk. If you would invest  124,590  in Action Construction Equipment on April 23, 2025 and sell it today you would lose (10,830) from holding Action Construction Equipment or give up 8.69% of portfolio value over 90 days.

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

Action Construction Equipment  vs.  General Insurance

Action Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Action Construction Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

General Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Action Construction and General Insurance

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

The idea behind Action Construction Equipment and General 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.