Correlation Between Argo Investments and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Argo Investments and Insurance Australia 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 Argo Investments and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argo Investments and Insurance Australia Group, you can compare the effects of market volatilities on Argo Investments and Insurance Australia 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 Argo Investments with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Investments and Insurance Australia.
Diversification Opportunities for Argo Investments and Insurance Australia
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Argo and Insurance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Argo Investments and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Argo Investments 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 Argo Investments are associated (or correlated) with Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Argo Investments i.e., Argo Investments and Insurance Australia go up and down completely randomly.
Pair Corralation between Argo Investments and Insurance Australia
Assuming the 90 days trading horizon Argo Investments is expected to generate 9.39 times less return on investment than Insurance Australia. But when comparing it to its historical volatility, Argo Investments is 2.2 times less risky than Insurance Australia. It trades about 0.07 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 854.00 in Insurance Australia Group on November 3, 2024 and sell it today you would earn a total of 66.00 from holding Insurance Australia Group or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Argo Investments vs. Insurance Australia Group
Performance |
| Timeline |
| Argo Investments |
| Insurance Australia |
Argo Investments and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Argo Investments and Insurance Australia
The main advantage of trading using opposite Argo Investments and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argo Investments position performs unexpectedly, Insurance Australia 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 Australia will offset losses from the drop in Insurance Australia's long position.| Argo Investments vs. Aneka Tambang Tbk | Argo Investments vs. BHP Group Limited | Argo Investments vs. Ecofibre | Argo Investments vs. iShares Global Healthcare |
| Insurance Australia vs. Aneka Tambang Tbk | Insurance Australia vs. BHP Group Limited | Insurance Australia vs. Ecofibre | Insurance Australia vs. iShares Global Healthcare |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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