Correlation Between H FARM and Insurance Australia

Can any of the company-specific risk be diversified away by investing in both H FARM 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 H FARM and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H FARM SPA and Insurance Australia Group, you can compare the effects of market volatilities on H FARM 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 H FARM with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of H FARM and Insurance Australia.

Diversification Opportunities for H FARM and Insurance Australia

-0.78

Correlation Coefficient

H FARM  Insurance Australia

Pay attention - limited upside

The 3 months correlation between 5JQ and Insurance is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and H FARM 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 H FARM SPA 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 H FARM i.e., H FARM and Insurance Australia go up and down completely randomly.

Pair Corralation between H FARM and Insurance Australia

Assuming the 90 days horizon H FARM is expected to generate 25.25 times less return on investment than Insurance Australia. In addition to that, H FARM is 2.98 times more volatile than Insurance Australia Group. It trades about 0.0 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.09 per unit of volatility. If you would invest  261.00  in Insurance Australia Group on September 18, 2024 and sell it today you would earn a total of  231.00  from holding Insurance Australia Group or generate 88.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

H FARM SPA  vs.  Insurance Australia Group

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Insurance Australia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with H FARM and Insurance Australia

The main advantage of trading using opposite H FARM and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H FARM 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 H FARM SPA 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.