Correlation Between Insurance Australia and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Motorcar Parts 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 Motorcar Parts 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 Motorcar Parts of, you can compare the effects of market volatilities on Insurance Australia and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Motorcar Parts.
Diversification Opportunities for Insurance Australia and Motorcar Parts
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and Motorcar is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of Insurance Australia i.e., Insurance Australia and Motorcar Parts go up and down completely randomly.
Pair Corralation between Insurance Australia and Motorcar Parts
Assuming the 90 days horizon Insurance Australia is expected to generate 2.56 times less return on investment than Motorcar Parts. But when comparing it to its historical volatility, Insurance Australia Group is 1.62 times less risky than Motorcar Parts. It trades about 0.32 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 474.00 in Motorcar Parts of on September 5, 2024 and sell it today you would earn a total of 256.00 from holding Motorcar Parts of or generate 54.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Insurance Australia Group vs. Motorcar Parts of
Performance |
| Timeline |
| Insurance Australia |
| Motorcar Parts |
Insurance Australia and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Motorcar Parts
The main advantage of trading using opposite Insurance Australia and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.| Insurance Australia vs. AEON STORES | Insurance Australia vs. FUYO GENERAL LEASE | Insurance Australia vs. United Rentals | Insurance Australia vs. SPARTAN STORES |
| Motorcar Parts vs. Selective Insurance Group | Motorcar Parts vs. CompuGroup Medical SE | Motorcar Parts vs. The Hanover Insurance | Motorcar Parts vs. Insurance Australia Group |
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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