Correlation Between Insurance Australia and Granite Construction
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Granite Construction 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 Granite Construction 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 Granite Construction, you can compare the effects of market volatilities on Insurance Australia and Granite Construction 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 Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Granite Construction.
Diversification Opportunities for Insurance Australia and Granite Construction
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and Granite is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction 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 Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of Insurance Australia i.e., Insurance Australia and Granite Construction go up and down completely randomly.
Pair Corralation between Insurance Australia and Granite Construction
Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.1 times more return on investment than Granite Construction. However, Insurance Australia is 1.1 times more volatile than Granite Construction. It trades about -0.07 of its potential returns per unit of risk. Granite Construction is currently generating about -0.25 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. Granite Construction
Performance |
| Timeline |
| Insurance Australia |
| Granite Construction |
Insurance Australia and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Granite Construction
The main advantage of trading using opposite Insurance Australia and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Granite Construction 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 Granite Construction will offset losses from the drop in Granite Construction's long position.| Insurance Australia vs. Goosehead Insurance | Insurance Australia vs. ATOSS SOFTWARE | Insurance Australia vs. Guidewire Software | Insurance Australia vs. HANOVER INSURANCE |
| Granite Construction vs. Chunghwa Telecom Co | Granite Construction vs. Meiko Electronics Co | Granite Construction vs. KIMBALL ELECTRONICS | Granite Construction vs. CITIC Telecom International |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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