Correlation Between Insurance Australia and LendingTree
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and LendingTree 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 LendingTree 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 LendingTree, you can compare the effects of market volatilities on Insurance Australia and LendingTree 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 LendingTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and LendingTree.
Diversification Opportunities for Insurance Australia and LendingTree
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Insurance and LendingTree is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and LendingTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingTree 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 LendingTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingTree has no effect on the direction of Insurance Australia i.e., Insurance Australia and LendingTree go up and down completely randomly.
Pair Corralation between Insurance Australia and LendingTree
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.42 times more return on investment than LendingTree. However, Insurance Australia Group is 2.4 times less risky than LendingTree. It trades about 0.11 of its potential returns per unit of risk. LendingTree is currently generating about -0.07 per unit of risk. If you would invest 456.00 in Insurance Australia Group on September 2, 2024 and sell it today you would earn a total of 54.00 from holding Insurance Australia Group or generate 11.84% 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. LendingTree
Performance |
| Timeline |
| Insurance Australia |
| LendingTree |
Insurance Australia and LendingTree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and LendingTree
The main advantage of trading using opposite Insurance Australia and LendingTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, LendingTree 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 LendingTree will offset losses from the drop in LendingTree's long position.| Insurance Australia vs. CarsalesCom | Insurance Australia vs. Gaztransport Technigaz SA | Insurance Australia vs. Air Transport Services | Insurance Australia vs. BII Railway Transportation |
| LendingTree vs. Insurance Australia Group | LendingTree vs. BRIT AMER TOBACCO | LendingTree vs. The Hanover Insurance | LendingTree vs. British American Tobacco |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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