Correlation Between Carsales and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Insurance Australia Group, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Insurance Australia.
Diversification Opportunities for Carsales and Insurance Australia
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and Insurance is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Insurance Australia go up and down completely randomly.
Pair Corralation between Carsales and Insurance Australia
Assuming the 90 days horizon CarsalesCom is expected to generate 0.55 times more return on investment than Insurance Australia. However, CarsalesCom is 1.82 times less risky than Insurance Australia. It trades about 0.38 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.14 per unit of risk. If you would invest 2,220 in CarsalesCom on August 25, 2024 and sell it today you would earn a total of 260.00 from holding CarsalesCom or generate 11.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Insurance Australia Group
Performance |
| Timeline |
| CarsalesCom |
| Insurance Australia |
Carsales and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Insurance Australia
The main advantage of trading using opposite Carsales and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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 CarsalesCom 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. Superior Plus Corp | Insurance Australia vs. NMI Holdings | Insurance Australia vs. Origin Agritech | Insurance Australia vs. SIVERS SEMICONDUCTORS AB |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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