Correlation Between Insurance Australia and Alternative Investment
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Alternative Investment 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 Alternative Investment 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 Alternative Investment Trust, you can compare the effects of market volatilities on Insurance Australia and Alternative Investment 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 Alternative Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Alternative Investment.
Diversification Opportunities for Insurance Australia and Alternative Investment
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Insurance and Alternative is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Alternative Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternative Investment 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 Alternative Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternative Investment has no effect on the direction of Insurance Australia i.e., Insurance Australia and Alternative Investment go up and down completely randomly.
Pair Corralation between Insurance Australia and Alternative Investment
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.7 times more return on investment than Alternative Investment. However, Insurance Australia Group is 1.43 times less risky than Alternative Investment. It trades about 0.31 of its potential returns per unit of risk. Alternative Investment Trust is currently generating about 0.15 per unit of risk. If you would invest 854.00 in Insurance Australia Group on November 3, 2024 and sell it today you would earn a total of 66.00 from holding Insurance Australia Group or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Alternative Investment Trust
Performance |
| Timeline |
| Insurance Australia |
| Alternative Investment |
Insurance Australia and Alternative Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Alternative Investment
The main advantage of trading using opposite Insurance Australia and Alternative Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Alternative Investment 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 Alternative Investment will offset losses from the drop in Alternative Investment's long position.| Insurance Australia vs. Aneka Tambang Tbk | Insurance Australia vs. BHP Group Limited | Insurance Australia vs. Ecofibre | Insurance Australia vs. iShares Global Healthcare |
| Alternative Investment vs. Aneka Tambang Tbk | Alternative Investment vs. BHP Group Limited | Alternative Investment vs. Ecofibre | Alternative Investment vs. iShares Global Healthcare |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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