Correlation Between Insurance Australia and EROAD
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and EROAD 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 EROAD 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 EROAD, you can compare the effects of market volatilities on Insurance Australia and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and EROAD.
Diversification Opportunities for Insurance Australia and EROAD
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insurance and EROAD is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Insurance Australia i.e., Insurance Australia and EROAD go up and down completely randomly.
Pair Corralation between Insurance Australia and EROAD
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.61 times more return on investment than EROAD. However, Insurance Australia Group is 1.63 times less risky than EROAD. It trades about 0.24 of its potential returns per unit of risk. EROAD is currently generating about 0.14 per unit of risk. If you would invest 754.00 in Insurance Australia Group on August 29, 2024 and sell it today you would earn a total of 52.00 from holding Insurance Australia Group or generate 6.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Insurance Australia Group vs. EROAD
Performance |
Timeline |
Insurance Australia |
EROAD |
Insurance Australia and EROAD Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Insurance Australia and EROAD
The main advantage of trading using opposite Insurance Australia and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.Insurance Australia vs. Aneka Tambang Tbk | Insurance Australia vs. Woolworths | Insurance Australia vs. Commonwealth Bank | Insurance Australia vs. BHP Group Limited |
EROAD vs. Navigator Global Investments | EROAD vs. Super Retail Group | EROAD vs. Regal Investment | EROAD vs. Australian United Investment |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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