Correlation Between Insurance Australia and Mystate
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Mystate 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 Mystate 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 Mystate, you can compare the effects of market volatilities on Insurance Australia and Mystate 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 Mystate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Mystate.
Diversification Opportunities for Insurance Australia and Mystate
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and Mystate is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate 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 Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of Insurance Australia i.e., Insurance Australia and Mystate go up and down completely randomly.
Pair Corralation between Insurance Australia and Mystate
Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.91 times more return on investment than Mystate. However, Insurance Australia Group is 1.1 times less risky than Mystate. It trades about 0.24 of its potential returns per unit of risk. Mystate is currently generating about 0.14 per unit of risk. If you would invest 754.00 in Insurance Australia Group on August 28, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Mystate
Performance |
| Timeline |
| Insurance Australia |
| Mystate |
Insurance Australia and Mystate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Mystate
The main advantage of trading using opposite Insurance Australia and Mystate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Mystate 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 Mystate will offset losses from the drop in Mystate's long position.| Insurance Australia vs. Aneka Tambang Tbk | Insurance Australia vs. Woolworths | Insurance Australia vs. Commonwealth Bank | Insurance Australia vs. BHP Group Limited |
| Mystate vs. Aneka Tambang Tbk | Mystate vs. BHP Group Limited | Mystate vs. Commonwealth Bank of | Mystate vs. Commonwealth Bank of |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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