Correlation Between Hotel Property and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Hotel Property 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 Hotel Property and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotel Property Investments and Insurance Australia Group, you can compare the effects of market volatilities on Hotel Property 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 Hotel Property with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotel Property and Insurance Australia.
Diversification Opportunities for Hotel Property and Insurance Australia
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hotel and Insurance is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Property 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 Hotel Property 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 Hotel Property 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 Hotel Property i.e., Hotel Property and Insurance Australia go up and down completely randomly.
Pair Corralation between Hotel Property and Insurance Australia
Assuming the 90 days trading horizon Hotel Property is expected to generate 1.44 times less return on investment than Insurance Australia. In addition to that, Hotel Property is 1.02 times more volatile than Insurance Australia Group. It trades about 0.1 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.15 per unit of volatility. If you would invest 591.00 in Insurance Australia Group on November 3, 2024 and sell it today you would earn a total of 329.00 from holding Insurance Australia Group or generate 55.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotel Property Investments vs. Insurance Australia Group
Performance |
| Timeline |
| Hotel Property Inves |
| Insurance Australia |
Hotel Property and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotel Property and Insurance Australia
The main advantage of trading using opposite Hotel Property and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotel Property 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.| Hotel Property vs. Chalice Mining Limited | Hotel Property vs. Vulcan Steel | Hotel Property vs. Galena Mining | Hotel Property vs. The Environmental Group |
| Insurance Australia vs. Microequities Asset Management | Insurance Australia vs. Sports Entertainment Group | Insurance Australia vs. The Environmental Group | Insurance Australia vs. Australian Unity Office |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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