Correlation Between Insurance Australia and Change Financial
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Change Financial 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 Change Financial 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 Change Financial Limited, you can compare the effects of market volatilities on Insurance Australia and Change Financial 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 Change Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Change Financial.
Diversification Opportunities for Insurance Australia and Change Financial
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Insurance and Change is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Change Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Financial 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 Change Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Financial has no effect on the direction of Insurance Australia i.e., Insurance Australia and Change Financial go up and down completely randomly.
Pair Corralation between Insurance Australia and Change Financial
Assuming the 90 days trading horizon Insurance Australia is expected to generate 6.95 times less return on investment than Change Financial. But when comparing it to its historical volatility, Insurance Australia Group is 4.5 times less risky than Change Financial. It trades about 0.14 of its potential returns per unit of risk. Change Financial Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5.90 in Change Financial Limited on October 30, 2024 and sell it today you would earn a total of 1.20 from holding Change Financial Limited or generate 20.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Change Financial Limited
Performance |
| Timeline |
| Insurance Australia |
| Change Financial |
Insurance Australia and Change Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Change Financial
The main advantage of trading using opposite Insurance Australia and Change Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Change Financial 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 Change Financial will offset losses from the drop in Change Financial's long position.| Insurance Australia vs. Healthco Healthcare and | Insurance Australia vs. Insignia Financial | Insurance Australia vs. Macquarie Bank Limited | Insurance Australia vs. Oneview Healthcare PLC |
| Change Financial vs. Falcon Metals | Change Financial vs. Aeon Metals | Change Financial vs. Commonwealth Bank of | Change Financial vs. MA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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