Correlation Between Insurance Australia and Aluminum
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Aluminum 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 Aluminum 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 Aluminum of, you can compare the effects of market volatilities on Insurance Australia and Aluminum 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 Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Aluminum.
Diversification Opportunities for Insurance Australia and Aluminum
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Insurance and Aluminum is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Insurance Australia i.e., Insurance Australia and Aluminum go up and down completely randomly.
Pair Corralation between Insurance Australia and Aluminum
Assuming the 90 days horizon Insurance Australia is expected to generate 2.55 times less return on investment than Aluminum. But when comparing it to its historical volatility, Insurance Australia Group is 2.68 times less risky than Aluminum. It trades about 0.21 of its potential returns per unit of risk. Aluminum of is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 56.00 in Aluminum of on October 29, 2024 and sell it today you would earn a total of 7.00 from holding Aluminum of or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Aluminum of
Performance |
| Timeline |
| Insurance Australia |
| Aluminum |
Insurance Australia and Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Aluminum
The main advantage of trading using opposite Insurance Australia and Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Aluminum 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 Aluminum will offset losses from the drop in Aluminum's long position.| Insurance Australia vs. Sunny Optical Technology | Insurance Australia vs. BioNTech SE | Insurance Australia vs. HELIOS TECHS INC | Insurance Australia vs. Easy Software AG |
| Aluminum vs. REINET INVESTMENTS SCA | Aluminum vs. Luckin Coffee | Aluminum vs. New Residential Investment | Aluminum vs. Norwegian Air Shuttle |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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