Correlation Between Insurance Australia and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Limited, you can compare the effects of market volatilities on Insurance Australia and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Macquarie Bank.
Diversification Opportunities for Insurance Australia and Macquarie Bank
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Insurance and Macquarie is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Insurance Australia i.e., Insurance Australia and Macquarie Bank go up and down completely randomly.
Pair Corralation between Insurance Australia and Macquarie Bank
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 2.71 times more return on investment than Macquarie Bank. However, Insurance Australia is 2.71 times more volatile than Macquarie Bank Limited. It trades about 0.15 of its potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.07 per unit of risk. If you would invest 630.00 in Insurance Australia Group on September 3, 2024 and sell it today you would earn a total of 223.00 from holding Insurance Australia Group or generate 35.4% 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. Macquarie Bank Limited
Performance |
| Timeline |
| Insurance Australia |
| Macquarie Bank |
Insurance Australia and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Macquarie Bank
The main advantage of trading using opposite Insurance Australia and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.| Insurance Australia vs. Alto Metals | Insurance Australia vs. Treasury Wine Estates | Insurance Australia vs. Centaurus Metals | Insurance Australia vs. Group 6 Metals |
| Macquarie Bank vs. NEWMONT PORATION CDI | Macquarie Bank vs. Ora Banda Mining | Macquarie Bank vs. Polymetals Resources | Macquarie Bank vs. Champion Iron |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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