Correlation Between Insurance Australia and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Insurance Australia and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and JAPAN TOBACCO.
Diversification Opportunities for Insurance Australia and JAPAN TOBACCO
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Insurance and JAPAN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of Insurance Australia i.e., Insurance Australia and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between Insurance Australia and JAPAN TOBACCO
Assuming the 90 days horizon Insurance Australia Group is expected to generate 2.01 times more return on investment than JAPAN TOBACCO. However, Insurance Australia is 2.01 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.02 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.19 per unit of risk. If you would invest 500.00 in Insurance Australia Group on September 25, 2024 and sell it today you would lose (4.00) from holding Insurance Australia Group or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| Insurance Australia |
| JAPAN TOBACCO UNSPADR12 |
Insurance Australia and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and JAPAN TOBACCO
The main advantage of trading using opposite Insurance Australia and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| Insurance Australia vs. CN MODERN DAIRY | Insurance Australia vs. Ross Stores | Insurance Australia vs. Caseys General Stores | Insurance Australia vs. Tyson Foods |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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