Correlation Between Insurance Australia and Nufarm
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Nufarm 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 Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on Insurance Australia and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Nufarm.
Diversification Opportunities for Insurance Australia and Nufarm
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Insurance and Nufarm is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Insurance Australia i.e., Insurance Australia and Nufarm go up and down completely randomly.
Pair Corralation between Insurance Australia and Nufarm
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.8 times more return on investment than Nufarm. However, Insurance Australia Group is 1.25 times less risky than Nufarm. It trades about -0.07 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.24 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Nufarm Limited
Performance |
| Timeline |
| Insurance Australia |
| Nufarm Limited |
Insurance Australia and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Nufarm
The main advantage of trading using opposite Insurance Australia and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| Insurance Australia vs. Goosehead Insurance | Insurance Australia vs. ATOSS SOFTWARE | Insurance Australia vs. Guidewire Software | Insurance Australia vs. HANOVER INSURANCE |
| Nufarm vs. Yara International ASA | Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. SIVERS SEMICONDUCTORS AB |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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