Correlation Between AIR PRODCHEMICALS and INSURANCE AUST
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and INSURANCE AUST 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 AIR PRODCHEMICALS and INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and INSURANCE AUST GRP, you can compare the effects of market volatilities on AIR PRODCHEMICALS and INSURANCE AUST 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 AIR PRODCHEMICALS with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and INSURANCE AUST.
Diversification Opportunities for AIR PRODCHEMICALS and INSURANCE AUST
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and INSURANCE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and INSURANCE AUST go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and INSURANCE AUST
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.94 times less return on investment than INSURANCE AUST. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 1.06 times less risky than INSURANCE AUST. It trades about 0.06 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 389.00 in INSURANCE AUST GRP on September 22, 2024 and sell it today you would earn a total of 107.00 from holding INSURANCE AUST GRP or generate 27.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. INSURANCE AUST GRP
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| INSURANCE AUST GRP |
AIR PRODCHEMICALS and INSURANCE AUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and INSURANCE AUST
The main advantage of trading using opposite AIR PRODCHEMICALS and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, INSURANCE AUST 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 INSURANCE AUST will offset losses from the drop in INSURANCE AUST's long position.The idea behind AIR PRODCHEMICALS and INSURANCE AUST GRP 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.| INSURANCE AUST vs. DAIRY FARM INTL | INSURANCE AUST vs. Sterling Construction | INSURANCE AUST vs. Entravision Communications | INSURANCE AUST vs. Australian Agricultural |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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