Correlation Between Origin Energy and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Origin Energy and Insurance Australia 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 Origin Energy and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Energy and Insurance Australia Group, you can compare the effects of market volatilities on Origin Energy and Insurance Australia 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 Origin Energy with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Energy and Insurance Australia.
Diversification Opportunities for Origin Energy and Insurance Australia
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Origin and Insurance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Origin Energy and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Origin Energy 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 Origin Energy are associated (or correlated) with Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Origin Energy i.e., Origin Energy and Insurance Australia go up and down completely randomly.
Pair Corralation between Origin Energy and Insurance Australia
Assuming the 90 days trading horizon Origin Energy is expected to generate 0.73 times more return on investment than Insurance Australia. However, Origin Energy is 1.37 times less risky than Insurance Australia. It trades about 0.63 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.29 per unit of risk. If you would invest 970.00 in Origin Energy on August 25, 2024 and sell it today you would earn a total of 130.00 from holding Origin Energy or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Origin Energy vs. Insurance Australia Group
Performance |
| Timeline |
| Origin Energy |
| Insurance Australia |
Origin Energy and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Energy and Insurance Australia
The main advantage of trading using opposite Origin Energy and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Energy position performs unexpectedly, Insurance Australia 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 Insurance Australia will offset losses from the drop in Insurance Australia's long position.| Origin Energy vs. Macquarie Technology Group | Origin Energy vs. Zoom2u Technologies | Origin Energy vs. Queste Communications | Origin Energy vs. Readytech Holdings |
| Insurance Australia vs. Dexus Convenience Retail | Insurance Australia vs. Retail Food Group | Insurance Australia vs. Australian United Investment | Insurance Australia vs. Pinnacle Investment Management |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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