Correlation Between Insurance Australia and Carsales
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Carsales 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 Carsales 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 Carsales, you can compare the effects of market volatilities on Insurance Australia and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Carsales.
Diversification Opportunities for Insurance Australia and Carsales
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Insurance and Carsales is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Insurance Australia i.e., Insurance Australia and Carsales go up and down completely randomly.
Pair Corralation between Insurance Australia and Carsales
Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the Carsales. In addition to that, Insurance Australia is 2.08 times more volatile than Carsales. It trades about -0.13 of its total potential returns per unit of risk. Carsales is currently generating about -0.16 per unit of volatility. If you would invest 2,380 in Carsales on November 25, 2024 and sell it today you would lose (140.00) from holding Carsales or give up 5.88% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Insurance Australia Group vs. Carsales
Performance |
Timeline |
Insurance Australia |
Carsales |
Insurance Australia and Carsales Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Insurance Australia and Carsales
The main advantage of trading using opposite Insurance Australia and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.Insurance Australia vs. H2O Retailing | ||
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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