Correlation Between Insurance Australia and Hotel Property
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Hotel Property 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 Hotel Property 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 Hotel Property Investments, you can compare the effects of market volatilities on Insurance Australia and Hotel Property 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 Hotel Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Hotel Property.
Diversification Opportunities for Insurance Australia and Hotel Property
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Insurance and Hotel is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Hotel Property Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Property Inves 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 Hotel Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Property Inves has no effect on the direction of Insurance Australia i.e., Insurance Australia and Hotel Property go up and down completely randomly.
Pair Corralation between Insurance Australia and Hotel Property
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 6.14 times more return on investment than Hotel Property. However, Insurance Australia is 6.14 times more volatile than Hotel Property Investments. It trades about 0.07 of its potential returns per unit of risk. Hotel Property Investments is currently generating about 0.0 per unit of risk. If you would invest 854.00 in Insurance Australia Group on October 23, 2024 and sell it today you would earn a total of 11.00 from holding Insurance Australia Group or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Hotel Property Investments
Performance |
| Timeline |
| Insurance Australia |
| Hotel Property Inves |
Insurance Australia and Hotel Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Hotel Property
The main advantage of trading using opposite Insurance Australia and Hotel Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Hotel Property 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 Hotel Property will offset losses from the drop in Hotel Property's long position.| Insurance Australia vs. Macquarie Group | Insurance Australia vs. Macquarie Group Ltd | Insurance Australia vs. Commonwealth Bank | Insurance Australia vs. Rio Tinto |
| Hotel Property vs. Scentre Group | Hotel Property vs. Vicinity Centres Re | Hotel Property vs. Charter Hall Retail | Hotel Property vs. Cromwell Property 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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