Correlation Between Insurance Australia and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Insurance Australia and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and STMicroelectronics.
Diversification Opportunities for Insurance Australia and STMicroelectronics
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insurance and STMicroelectronics is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Insurance Australia i.e., Insurance Australia and STMicroelectronics go up and down completely randomly.
Pair Corralation between Insurance Australia and STMicroelectronics
Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.15 times more return on investment than STMicroelectronics. However, Insurance Australia is 1.15 times more volatile than STMicroelectronics NV. It trades about 0.17 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.01 per unit of risk. If you would invest 466.00 in Insurance Australia Group on September 12, 2024 and sell it today you would earn a total of 39.00 from holding Insurance Australia Group or generate 8.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. STMicroelectronics NV
Performance |
| Timeline |
| Insurance Australia |
| STMicroelectronics |
Insurance Australia and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and STMicroelectronics
The main advantage of trading using opposite Insurance Australia and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Insurance Australia vs. QBE Insurance Group | Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. SIVERS SEMICONDUCTORS AB | Insurance Australia vs. CHINA HUARONG ENERHD 50 |
| STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Broadcom | STMicroelectronics vs. Superior Plus Corp | STMicroelectronics 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 Valuation module to check real value of public entities based on technical and fundamental data.
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