Correlation Between Native Mineral and Insignia Financial
Can any of the company-specific risk be diversified away by investing in both Native Mineral and Insignia Financial 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 Native Mineral and Insignia Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Native Mineral Resources and Insignia Financial, you can compare the effects of market volatilities on Native Mineral and Insignia Financial 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 Native Mineral with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Native Mineral and Insignia Financial.
Diversification Opportunities for Native Mineral and Insignia Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Native and Insignia is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Native Mineral Resources and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Native Mineral 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 Native Mineral Resources are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Native Mineral i.e., Native Mineral and Insignia Financial go up and down completely randomly.
Pair Corralation between Native Mineral and Insignia Financial
Assuming the 90 days trading horizon Native Mineral Resources is expected to generate 3.63 times more return on investment than Insignia Financial. However, Native Mineral is 3.63 times more volatile than Insignia Financial. It trades about 0.01 of its potential returns per unit of risk. Insignia Financial is currently generating about 0.01 per unit of risk. If you would invest 14.00 in Native Mineral Resources on September 3, 2024 and sell it today you would lose (10.70) from holding Native Mineral Resources or give up 76.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Native Mineral Resources vs. Insignia Financial
Performance |
| Timeline |
| Native Mineral Resources |
| Insignia Financial |
Native Mineral and Insignia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Native Mineral and Insignia Financial
The main advantage of trading using opposite Native Mineral and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Native Mineral position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.| Native Mineral vs. Insignia Financial | Native Mineral vs. Qbe Insurance Group | Native Mineral vs. Bell Financial Group | Native Mineral vs. Computershare |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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