Correlation Between Insignia Financial and Hammer Metals
Can any of the company-specific risk be diversified away by investing in both Insignia Financial and Hammer Metals 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 Hammer Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insignia Financial and Hammer Metals, you can compare the effects of market volatilities on Insignia Financial and Hammer Metals 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 Hammer Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insignia Financial and Hammer Metals.
Diversification Opportunities for Insignia Financial and Hammer Metals
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insignia and Hammer is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals 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 Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of Insignia Financial i.e., Insignia Financial and Hammer Metals go up and down completely randomly.
Pair Corralation between Insignia Financial and Hammer Metals
Assuming the 90 days trading horizon Insignia Financial is expected to generate 0.35 times more return on investment than Hammer Metals. However, Insignia Financial is 2.82 times less risky than Hammer Metals. It trades about 0.17 of its potential returns per unit of risk. Hammer Metals is currently generating about 0.05 per unit of risk. If you would invest 406.00 in Insignia Financial on November 7, 2024 and sell it today you would earn a total of 26.00 from holding Insignia Financial or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insignia Financial vs. Hammer Metals
Performance |
| Timeline |
| Insignia Financial |
| Hammer Metals |
Insignia Financial and Hammer Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insignia Financial and Hammer Metals
The main advantage of trading using opposite Insignia Financial and Hammer Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insignia Financial position performs unexpectedly, Hammer Metals 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 Hammer Metals will offset losses from the drop in Hammer Metals' long position.| Insignia Financial vs. Diversified United Investment | Insignia Financial vs. Hutchison Telecommunications | Insignia Financial vs. Charter Hall Retail | Insignia Financial vs. Mirrabooka Investments |
| Hammer Metals vs. Northern Star Resources | Hammer Metals vs. Evolution Mining | Hammer Metals vs. Bluescope Steel | Hammer Metals vs. De Grey Mining |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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