Correlation Between Canadian Utilities and INSURANCE AUST
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and INSURANCE AUST GRP, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and INSURANCE AUST.
Diversification Opportunities for Canadian Utilities and INSURANCE AUST
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and INSURANCE is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited 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 Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and INSURANCE AUST go up and down completely randomly.
Pair Corralation between Canadian Utilities and INSURANCE AUST
Assuming the 90 days horizon Canadian Utilities is expected to generate 3.05 times less return on investment than INSURANCE AUST. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.32 times less risky than INSURANCE AUST. It trades about 0.19 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 436.00 in INSURANCE AUST GRP on September 2, 2024 and sell it today you would earn a total of 79.00 from holding INSURANCE AUST GRP or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. INSURANCE AUST GRP
Performance |
| Timeline |
| Canadian Utilities |
| INSURANCE AUST GRP |
Canadian Utilities and INSURANCE AUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and INSURANCE AUST
The main advantage of trading using opposite Canadian Utilities and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.| Canadian Utilities vs. British American Tobacco | Canadian Utilities vs. CANON MARKETING JP | Canadian Utilities vs. TRADEGATE | Canadian Utilities vs. Auto Trader Group |
| INSURANCE AUST vs. HYDROFARM HLD GRP | INSURANCE AUST vs. H FARM SPA | INSURANCE AUST vs. North American Construction | INSURANCE AUST vs. NTG Nordic Transport |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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