Correlation Between Insurance Australia and United Insurance
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and United Insurance 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 United Insurance 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 United Insurance Holdings, you can compare the effects of market volatilities on Insurance Australia and United Insurance 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 United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and United Insurance.
Diversification Opportunities for Insurance Australia and United Insurance
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Insurance and United is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of Insurance Australia i.e., Insurance Australia and United Insurance go up and down completely randomly.
Pair Corralation between Insurance Australia and United Insurance
Assuming the 90 days horizon Insurance Australia is expected to generate 3.97 times less return on investment than United Insurance. But when comparing it to its historical volatility, Insurance Australia Group is 2.35 times less risky than United Insurance. It trades about 0.13 of its potential returns per unit of risk. United Insurance Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 965.00 in United Insurance Holdings on August 25, 2024 and sell it today you would earn a total of 265.00 from holding United Insurance Holdings or generate 27.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. United Insurance Holdings
Performance |
| Timeline |
| Insurance Australia |
| United Insurance Holdings |
Insurance Australia and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and United Insurance
The main advantage of trading using opposite Insurance Australia and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, United Insurance 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 United Insurance will offset losses from the drop in United Insurance's long position.| Insurance Australia vs. QBE Insurance Group | Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. NMI Holdings | Insurance Australia vs. Origin Agritech |
| United Insurance vs. QBE Insurance Group | United Insurance vs. Insurance Australia Group | United Insurance vs. Superior Plus Corp | United Insurance vs. NMI Holdings |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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