Correlation Between INSURANCE AUST and ETFS Coffee
Can any of the company-specific risk be diversified away by investing in both INSURANCE AUST and ETFS Coffee 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 AUST and ETFS Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INSURANCE AUST GRP and ETFS Coffee ETC, you can compare the effects of market volatilities on INSURANCE AUST and ETFS Coffee 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 AUST with a short position of ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSURANCE AUST and ETFS Coffee.
Diversification Opportunities for INSURANCE AUST and ETFS Coffee
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between INSURANCE and ETFS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC and INSURANCE AUST 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 AUST GRP are associated (or correlated) with ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and ETFS Coffee go up and down completely randomly.
Pair Corralation between INSURANCE AUST and ETFS Coffee
Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 6.68 times less return on investment than ETFS Coffee. But when comparing it to its historical volatility, INSURANCE AUST GRP is 1.98 times less risky than ETFS Coffee. It trades about 0.13 of its potential returns per unit of risk. ETFS Coffee ETC is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 4,131 in ETFS Coffee ETC on September 13, 2024 and sell it today you would earn a total of 1,411 from holding ETFS Coffee ETC or generate 34.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
INSURANCE AUST GRP vs. ETFS Coffee ETC
Performance |
| Timeline |
| INSURANCE AUST GRP |
| ETFS Coffee ETC |
INSURANCE AUST and ETFS Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INSURANCE AUST and ETFS Coffee
The main advantage of trading using opposite INSURANCE AUST and ETFS Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST position performs unexpectedly, ETFS Coffee 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 ETFS Coffee will offset losses from the drop in ETFS Coffee's long position.| INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc |
| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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