Correlation Between Finexia Financial and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Finexia Financial 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 Finexia Financial and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finexia Financial Group and Insurance Australia Group, you can compare the effects of market volatilities on Finexia Financial 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 Finexia Financial with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finexia Financial and Insurance Australia.
Diversification Opportunities for Finexia Financial and Insurance Australia
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Finexia and Insurance is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Finexia Financial Group and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Finexia Financial 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 Finexia Financial Group 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 Finexia Financial i.e., Finexia Financial and Insurance Australia go up and down completely randomly.
Pair Corralation between Finexia Financial and Insurance Australia
Assuming the 90 days trading horizon Finexia Financial is expected to generate 2.25 times less return on investment than Insurance Australia. In addition to that, Finexia Financial is 3.56 times more volatile than Insurance Australia Group. It trades about 0.01 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.12 per unit of volatility. If you would invest 440.00 in Insurance Australia Group on November 1, 2024 and sell it today you would earn a total of 455.00 from holding Insurance Australia Group or generate 103.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Finexia Financial Group vs. Insurance Australia Group
Performance |
| Timeline |
| Finexia Financial |
| Insurance Australia |
Finexia Financial and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Finexia Financial and Insurance Australia
The main advantage of trading using opposite Finexia Financial and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finexia Financial 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.| Finexia Financial vs. Ecofibre | Finexia Financial vs. iShares Global Healthcare | Finexia Financial vs. Australian Dairy Farms | Finexia Financial vs. Adriatic Metals Plc |
| Insurance Australia vs. Sonic Healthcare | Insurance Australia vs. Queste Communications | Insurance Australia vs. Fisher Paykel Healthcare | Insurance Australia vs. TPG Telecom |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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