Correlation Between Insignia Financial and Ecofibre
Can any of the company-specific risk be diversified away by investing in both Insignia Financial and Ecofibre 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 Insignia Financial and Ecofibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insignia Financial and Ecofibre, you can compare the effects of market volatilities on Insignia Financial and Ecofibre 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 Insignia Financial with a short position of Ecofibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insignia Financial and Ecofibre.
Diversification Opportunities for Insignia Financial and Ecofibre
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Insignia and Ecofibre is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre and Insignia Financial 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 Insignia Financial are associated (or correlated) with Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Insignia Financial i.e., Insignia Financial and Ecofibre go up and down completely randomly.
Pair Corralation between Insignia Financial and Ecofibre
Assuming the 90 days trading horizon Insignia Financial is expected to generate 0.53 times more return on investment than Ecofibre. However, Insignia Financial is 1.89 times less risky than Ecofibre. It trades about -0.11 of its potential returns per unit of risk. Ecofibre is currently generating about -0.2 per unit of risk. If you would invest 333.00 in Insignia Financial on August 28, 2024 and sell it today you would lose (15.00) from holding Insignia Financial or give up 4.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insignia Financial vs. Ecofibre
Performance |
| Timeline |
| Insignia Financial |
| Ecofibre |
Insignia Financial and Ecofibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insignia Financial and Ecofibre
The main advantage of trading using opposite Insignia Financial and Ecofibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insignia Financial position performs unexpectedly, Ecofibre 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 Ecofibre will offset losses from the drop in Ecofibre's long position.| Insignia Financial vs. National Australia Bank | Insignia Financial vs. National Australia Bank | Insignia Financial vs. Westpac Banking | Insignia Financial vs. National Australia Bank |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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