Correlation Between Insurance Australia and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Australian Agricultural 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 Insurance Australia and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insurance Australia Group and Australian Agricultural, you can compare the effects of market volatilities on Insurance Australia and Australian Agricultural 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 Insurance Australia with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Australian Agricultural.
Diversification Opportunities for Insurance Australia and Australian Agricultural
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insurance and Australian is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Insurance Australia 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 Insurance Australia Group are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Insurance Australia i.e., Insurance Australia and Australian Agricultural go up and down completely randomly.
Pair Corralation between Insurance Australia and Australian Agricultural
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.69 times more return on investment than Australian Agricultural. However, Insurance Australia Group is 1.46 times less risky than Australian Agricultural. It trades about 0.13 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.01 per unit of risk. If you would invest 484.00 in Insurance Australia Group on September 1, 2024 and sell it today you would earn a total of 369.00 from holding Insurance Australia Group or generate 76.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Insurance Australia Group vs. Australian Agricultural
Performance |
| Timeline |
| Insurance Australia |
| Australian Agricultural |
Insurance Australia and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Australian Agricultural
The main advantage of trading using opposite Insurance Australia and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Insurance Australia vs. Macquarie Bank Limited | Insurance Australia vs. Computershare | Insurance Australia vs. Ras Technology Holdings | Insurance Australia vs. Kkr Credit Income |
| Australian Agricultural vs. Retail Food Group | Australian Agricultural vs. Spirit Telecom | Australian Agricultural vs. Credit Clear | Australian Agricultural vs. Wt Financial 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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