Correlation Between Insurance Australia and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and DAIRY FARM 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 DAIRY FARM 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 DAIRY FARM INTL, you can compare the effects of market volatilities on Insurance Australia and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and DAIRY FARM.
Diversification Opportunities for Insurance Australia and DAIRY FARM
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and DAIRY is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Insurance Australia i.e., Insurance Australia and DAIRY FARM go up and down completely randomly.
Pair Corralation between Insurance Australia and DAIRY FARM
Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.18 times more return on investment than DAIRY FARM. However, Insurance Australia is 1.18 times more volatile than DAIRY FARM INTL. It trades about -0.07 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.13 per unit of risk. If you would invest 505.00 in Insurance Australia Group on October 11, 2024 and sell it today you would lose (9.00) from holding Insurance Australia Group or give up 1.78% 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. DAIRY FARM INTL
Performance |
| Timeline |
| Insurance Australia |
| DAIRY FARM INTL |
Insurance Australia and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and DAIRY FARM
The main advantage of trading using opposite Insurance Australia and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| Insurance Australia vs. Goosehead Insurance | Insurance Australia vs. ATOSS SOFTWARE | Insurance Australia vs. Guidewire Software | Insurance Australia vs. HANOVER INSURANCE |
| DAIRY FARM vs. NORTHEAST UTILITIES | DAIRY FARM vs. Canadian Utilities Limited | DAIRY FARM vs. UNITED UTILITIES GR | DAIRY FARM vs. VIENNA INSURANCE GR |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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