Correlation Between Insurance Australia and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on Insurance Australia and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Automatic Data.
Diversification Opportunities for Insurance Australia and Automatic Data
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and Automatic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Insurance Australia i.e., Insurance Australia and Automatic Data go up and down completely randomly.
Pair Corralation between Insurance Australia and Automatic Data
Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.05 times more return on investment than Automatic Data. However, Insurance Australia is 1.05 times more volatile than Automatic Data Processing. It trades about -0.01 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.06 per unit of risk. If you would invest 426.00 in Insurance Australia Group on January 14, 2025 and sell it today you would lose (6.00) from holding Insurance Australia Group or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Automatic Data Processing
Performance |
| Timeline |
| Insurance Australia |
| Automatic Data Processing |
Insurance Australia and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Automatic Data
The main advantage of trading using opposite Insurance Australia and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Insurance Australia vs. CompuGroup Medical SE | Insurance Australia vs. Sun Art Retail | Insurance Australia vs. BURLINGTON STORES | Insurance Australia vs. Apollo Medical Holdings |
| Automatic Data vs. DATAWALK B H ZY | Automatic Data vs. VULCAN MATERIALS | Automatic Data vs. CN DATANG C | Automatic Data vs. Vulcan Materials |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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