Correlation Between Safety Insurance and Transurban
Can any of the company-specific risk be diversified away by investing in both Safety Insurance and Transurban 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 Safety Insurance and Transurban into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and Transurban Group, you can compare the effects of market volatilities on Safety Insurance and Transurban 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 Safety Insurance with a short position of Transurban. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Transurban.
Diversification Opportunities for Safety Insurance and Transurban
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Safety and Transurban is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Transurban Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transurban Group and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with Transurban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transurban Group has no effect on the direction of Safety Insurance i.e., Safety Insurance and Transurban go up and down completely randomly.
Pair Corralation between Safety Insurance and Transurban
Assuming the 90 days horizon Safety Insurance Group is expected to generate 1.27 times more return on investment than Transurban. However, Safety Insurance is 1.27 times more volatile than Transurban Group. It trades about 0.05 of its potential returns per unit of risk. Transurban Group is currently generating about 0.03 per unit of risk. If you would invest 6,867 in Safety Insurance Group on September 4, 2024 and sell it today you would earn a total of 1,083 from holding Safety Insurance Group or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safety Insurance Group vs. Transurban Group
Performance |
| Timeline |
| Safety Insurance |
| Transurban Group |
Safety Insurance and Transurban Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Transurban
The main advantage of trading using opposite Safety Insurance and Transurban positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance position performs unexpectedly, Transurban 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 Transurban will offset losses from the drop in Transurban's long position.| Safety Insurance vs. MTI WIRELESS EDGE | Safety Insurance vs. WIZZ AIR HLDGUNSPADR4 | Safety Insurance vs. MYFAIR GOLD P | Safety Insurance vs. CITY OFFICE REIT |
| Transurban vs. Automatic Data Processing | Transurban vs. Japan Post Insurance | Transurban vs. QBE Insurance Group | Transurban vs. Safety Insurance 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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