Correlation Between Insurance Australia and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Playtech Plc 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 Playtech Plc 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 Playtech plc, you can compare the effects of market volatilities on Insurance Australia and Playtech Plc 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Playtech Plc.
Diversification Opportunities for Insurance Australia and Playtech Plc
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Insurance and Playtech is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Insurance Australia i.e., Insurance Australia and Playtech Plc go up and down completely randomly.
Pair Corralation between Insurance Australia and Playtech Plc
Assuming the 90 days horizon Insurance Australia Group is expected to generate 2.28 times more return on investment than Playtech Plc. However, Insurance Australia is 2.28 times more volatile than Playtech plc. It trades about 0.23 of its potential returns per unit of risk. Playtech plc is currently generating about 0.0 per unit of risk. If you would invest 442.00 in Insurance Australia Group on August 31, 2024 and sell it today you would earn a total of 52.00 from holding Insurance Australia Group or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Playtech plc
Performance |
| Timeline |
| Insurance Australia |
| Playtech plc |
Insurance Australia and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Playtech Plc
The main advantage of trading using opposite Insurance Australia and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Playtech Plc 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 Playtech Plc will offset losses from the drop in Playtech Plc's long position.| Insurance Australia vs. BURLINGTON STORES | Insurance Australia vs. DELTA AIR LINES | Insurance Australia vs. Burlington Stores | Insurance Australia vs. SEALED AIR |
| Playtech Plc vs. MAVEN WIRELESS SWEDEN | Playtech Plc vs. Tri Pointe Homes | Playtech Plc vs. Gol Intelligent Airlines | Playtech Plc vs. American Airlines Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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