Correlation Between Summit Resources and Insignia Financial
Can any of the company-specific risk be diversified away by investing in both Summit Resources and Insignia Financial 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 Summit Resources and Insignia Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Resources Limited and Insignia Financial, you can compare the effects of market volatilities on Summit Resources and Insignia Financial 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 Summit Resources with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Resources and Insignia Financial.
Diversification Opportunities for Summit Resources and Insignia Financial
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Summit and Insignia is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Summit Resources Limited and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Summit Resources 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 Summit Resources Limited are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Summit Resources i.e., Summit Resources and Insignia Financial go up and down completely randomly.
Pair Corralation between Summit Resources and Insignia Financial
Assuming the 90 days trading horizon Summit Resources Limited is expected to under-perform the Insignia Financial. In addition to that, Summit Resources is 5.7 times more volatile than Insignia Financial. It trades about -0.26 of its total potential returns per unit of risk. Insignia Financial is currently generating about -0.12 per unit of volatility. If you would invest 333.00 in Insignia Financial on August 27, 2024 and sell it today you would lose (16.00) from holding Insignia Financial or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Resources Limited vs. Insignia Financial
Performance |
| Timeline |
| Summit Resources |
| Insignia Financial |
Summit Resources and Insignia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Resources and Insignia Financial
The main advantage of trading using opposite Summit Resources and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Resources position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.| Summit Resources vs. Northern Star Resources | Summit Resources vs. Evolution Mining | Summit Resources vs. Bluescope Steel | Summit Resources vs. Sandfire Resources NL |
| Insignia Financial vs. National Australia Bank | Insignia Financial vs. National Australia Bank | Insignia Financial vs. Westpac Banking | Insignia Financial vs. National Australia Bank |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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