Correlation Between Insurance Australia and Cabot
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Cabot 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 Cabot 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 Cabot, you can compare the effects of market volatilities on Insurance Australia and Cabot 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 Cabot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Cabot.
Diversification Opportunities for Insurance Australia and Cabot
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insurance and Cabot is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Insurance Australia i.e., Insurance Australia and Cabot go up and down completely randomly.
Pair Corralation between Insurance Australia and Cabot
Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.21 times more return on investment than Cabot. However, Insurance Australia is 1.21 times more volatile than Cabot. It trades about 0.09 of its potential returns per unit of risk. Cabot is currently generating about -0.36 per unit of risk. If you would invest 466.00 in Insurance Australia Group on October 11, 2024 and sell it today you would earn a total of 30.00 from holding Insurance Australia Group or generate 6.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.44% |
| Values | Daily Returns |
Insurance Australia Group vs. Cabot
Performance |
| Timeline |
| Insurance Australia |
| Cabot |
Insurance Australia and Cabot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Cabot
The main advantage of trading using opposite Insurance Australia and Cabot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Cabot 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 Cabot will offset losses from the drop in Cabot's long position.| Insurance Australia vs. Goosehead Insurance | Insurance Australia vs. ATOSS SOFTWARE | Insurance Australia vs. Guidewire Software | Insurance Australia vs. HANOVER INSURANCE |
| Cabot vs. QBE Insurance Group | Cabot vs. Insurance Australia Group | Cabot vs. FUYO GENERAL LEASE | Cabot vs. SBI Insurance 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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