Correlation Between Insurance Australia and Legacy Iron
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Legacy Iron 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 Legacy Iron 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 Legacy Iron Ore, you can compare the effects of market volatilities on Insurance Australia and Legacy Iron 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 Legacy Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Legacy Iron.
Diversification Opportunities for Insurance Australia and Legacy Iron
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insurance and Legacy is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Legacy Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Iron Ore 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 Legacy Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Iron Ore has no effect on the direction of Insurance Australia i.e., Insurance Australia and Legacy Iron go up and down completely randomly.
Pair Corralation between Insurance Australia and Legacy Iron
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.26 times more return on investment than Legacy Iron. However, Insurance Australia Group is 3.88 times less risky than Legacy Iron. It trades about 0.1 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about 0.01 per unit of risk. If you would invest 440.00 in Insurance Australia Group on August 24, 2024 and sell it today you would earn a total of 382.00 from holding Insurance Australia Group or generate 86.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Insurance Australia Group vs. Legacy Iron Ore
Performance |
| Timeline |
| Insurance Australia |
| Legacy Iron Ore |
Insurance Australia and Legacy Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Legacy Iron
The main advantage of trading using opposite Insurance Australia and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Legacy Iron 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 Legacy Iron will offset losses from the drop in Legacy Iron's long position.| Insurance Australia vs. Legacy Iron Ore | Insurance Australia vs. REGAL ASIAN INVESTMENTS | Insurance Australia vs. BKI Investment | Insurance Australia vs. Alternative Investment Trust |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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