Correlation Between Snap and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Insurance Australia Group, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Insurance Australia.
Diversification Opportunities for Snap and Insurance Australia
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Snap and Insurance is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Snap 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 Snap Inc 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 Snap i.e., Snap and Insurance Australia go up and down completely randomly.
Pair Corralation between Snap and Insurance Australia
Given the investment horizon of 90 days Snap is expected to generate 1.32 times less return on investment than Insurance Australia. In addition to that, Snap is 2.43 times more volatile than Insurance Australia Group. It trades about 0.03 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.1 per unit of volatility. If you would invest 282.00 in Insurance Australia Group on August 31, 2024 and sell it today you would earn a total of 228.00 from holding Insurance Australia Group or generate 80.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.42% |
| Values | Daily Returns |
Snap Inc vs. Insurance Australia Group
Performance |
| Timeline |
| Snap Inc |
| Insurance Australia |
Snap and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Insurance Australia
The main advantage of trading using opposite Snap and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Insurance Australia Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Insurance Australia vs. BURLINGTON STORES | Insurance Australia vs. DELTA AIR LINES | Insurance Australia vs. Burlington Stores | Insurance Australia vs. SEALED AIR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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