Correlation Between Insurance Australia and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and GOODYEAR T 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 GOODYEAR T 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 GOODYEAR T RUBBER, you can compare the effects of market volatilities on Insurance Australia and GOODYEAR T 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 GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and GOODYEAR T.
Diversification Opportunities for Insurance Australia and GOODYEAR T
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Insurance and GOODYEAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Insurance Australia i.e., Insurance Australia and GOODYEAR T go up and down completely randomly.
Pair Corralation between Insurance Australia and GOODYEAR T
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.64 times more return on investment than GOODYEAR T. However, Insurance Australia Group is 1.55 times less risky than GOODYEAR T. It trades about 0.12 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about -0.05 per unit of risk. If you would invest 318.00 in Insurance Australia Group on September 20, 2024 and sell it today you would earn a total of 197.00 from holding Insurance Australia Group or generate 61.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. GOODYEAR T RUBBER
Performance |
| Timeline |
| Insurance Australia |
| GOODYEAR T RUBBER |
Insurance Australia and GOODYEAR T Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and GOODYEAR T
The main advantage of trading using opposite Insurance Australia and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.| Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. SIVERS SEMICONDUCTORS AB | Insurance Australia vs. CHINA HUARONG ENERHD 50 | Insurance Australia vs. NORDIC HALIBUT AS |
| GOODYEAR T vs. Khiron Life Sciences | GOODYEAR T vs. Eagle Materials | GOODYEAR T vs. ITALIAN WINE BRANDS | GOODYEAR T vs. THRACE PLASTICS |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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