Correlation Between Insurance Australia and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Insurance Australia and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Summit Materials.
Diversification Opportunities for Insurance Australia and Summit Materials
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and Summit is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Insurance Australia i.e., Insurance Australia and Summit Materials go up and down completely randomly.
Pair Corralation between Insurance Australia and Summit Materials
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.78 times more return on investment than Summit Materials. However, Insurance Australia Group is 1.28 times less risky than Summit Materials. It trades about 0.12 of its potential returns per unit of risk. Summit Materials is currently generating about 0.07 per unit of risk. If you would invest 318.00 in Insurance Australia Group on September 20, 2024 and sell it today you would earn a total of 197.00 from holding Insurance Australia Group or generate 61.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Summit Materials
Performance |
| Timeline |
| Insurance Australia |
| Summit Materials |
Insurance Australia and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Summit Materials
The main advantage of trading using opposite Insurance Australia and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. SIVERS SEMICONDUCTORS AB | Insurance Australia vs. CHINA HUARONG ENERHD 50 | Insurance Australia vs. NORDIC HALIBUT AS |
| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials 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 Stocks Directory module to find actively traded stocks across global markets.
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