Correlation Between Collins Foods and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Collins Foods 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 Collins Foods and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods and Insurance Australia Group, you can compare the effects of market volatilities on Collins Foods 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 Collins Foods with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and Insurance Australia.
Diversification Opportunities for Collins Foods and Insurance Australia
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Collins and Insurance is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Collins Foods 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 Collins Foods 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 Collins Foods i.e., Collins Foods and Insurance Australia go up and down completely randomly.
Pair Corralation between Collins Foods and Insurance Australia
Assuming the 90 days trading horizon Collins Foods is expected to generate 3.63 times less return on investment than Insurance Australia. But when comparing it to its historical volatility, Collins Foods is 1.95 times less risky than Insurance Australia. It trades about 0.19 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 755.00 in Insurance Australia Group on August 30, 2024 and sell it today you would earn a total of 92.00 from holding Insurance Australia Group or generate 12.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods vs. Insurance Australia Group
Performance |
| Timeline |
| Collins Foods |
| Insurance Australia |
Collins Foods and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and Insurance Australia
The main advantage of trading using opposite Collins Foods and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods 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.| Collins Foods vs. Olivers Real Food | Collins Foods vs. ACDC Metals | Collins Foods vs. Strickland Metals | Collins Foods vs. Aeris Environmental |
| Insurance Australia vs. PVW Resources | Insurance Australia vs. Woolworths | Insurance Australia vs. Wesfarmers | Insurance Australia vs. Coles Group |
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 Stocks Directory module to find actively traded stocks across global markets.
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