Correlation Between Air Transport and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and Insurance Australia Group, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Insurance Australia.
Diversification Opportunities for Air Transport and Insurance Australia
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Insurance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Air Transport 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 Transport Services 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 Air Transport i.e., Air Transport and Insurance Australia go up and down completely randomly.
Pair Corralation between Air Transport and Insurance Australia
Assuming the 90 days horizon Air Transport is expected to generate 7.3 times less return on investment than Insurance Australia. But when comparing it to its historical volatility, Air Transport Services is 1.96 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 0.25 of returns per unit of risk over similar time horizon. If you would invest 505.00 in Insurance Australia Group on November 7, 2024 and sell it today you would earn a total of 35.00 from holding Insurance Australia Group or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Air Transport Services vs. Insurance Australia Group
Performance |
| Timeline |
| Air Transport Services |
| Insurance Australia |
Air Transport and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Insurance Australia
The main advantage of trading using opposite Air Transport and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. MAGNUM MINING EXP | Air Transport vs. GALENA MINING LTD | Air Transport vs. ARDAGH METAL PACDL 0001 | Air Transport vs. East Africa Metals |
| Insurance Australia vs. Singapore Telecommunications Limited | Insurance Australia vs. DISTRICT METALS | Insurance Australia vs. Coeur Mining | Insurance Australia vs. East Africa Metals |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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