Correlation Between Insurance Australia and ARISTOCRAT LEISURE
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE, you can compare the effects of market volatilities on Insurance Australia and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and ARISTOCRAT LEISURE.
Diversification Opportunities for Insurance Australia and ARISTOCRAT LEISURE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and ARISTOCRAT is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Insurance Australia i.e., Insurance Australia and ARISTOCRAT LEISURE go up and down completely randomly.
Pair Corralation between Insurance Australia and ARISTOCRAT LEISURE
Assuming the 90 days horizon Insurance Australia is expected to generate 1.06 times less return on investment than ARISTOCRAT LEISURE. In addition to that, Insurance Australia is 2.46 times more volatile than ARISTOCRAT LEISURE. It trades about 0.23 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.59 per unit of volatility. If you would invest 3,680 in ARISTOCRAT LEISURE on August 31, 2024 and sell it today you would earn a total of 480.00 from holding ARISTOCRAT LEISURE or generate 13.04% 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. ARISTOCRAT LEISURE
Performance |
| Timeline |
| Insurance Australia |
| ARISTOCRAT LEISURE |
Insurance Australia and ARISTOCRAT LEISURE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and ARISTOCRAT LEISURE
The main advantage of trading using opposite Insurance Australia and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE will offset losses from the drop in ARISTOCRAT LEISURE's long position.| Insurance Australia vs. BURLINGTON STORES | Insurance Australia vs. DELTA AIR LINES | Insurance Australia vs. Burlington Stores | Insurance Australia vs. SEALED AIR |
| ARISTOCRAT LEISURE vs. SIVERS SEMICONDUCTORS AB | ARISTOCRAT LEISURE vs. Darden Restaurants | ARISTOCRAT LEISURE vs. Reliance Steel Aluminum | ARISTOCRAT LEISURE vs. Q2M Managementberatung AG |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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