Correlation Between VARIOUS EATERIES and Insurance Australia

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

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

Diversification Opportunities for VARIOUS EATERIES and Insurance Australia

0.15

Correlation Coefficient

VARIOUS EATERIES  Insurance Australia

Average diversification

The 3 months correlation between VARIOUS and Insurance is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 VARIOUS EATERIES i.e., VARIOUS EATERIES and Insurance Australia go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and Insurance Australia

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the Insurance Australia. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.29 times less risky than Insurance Australia. The stock trades about -0.04 of its potential returns per unit of risk. The Insurance Australia Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  363.00  in Insurance Australia Group on September 1, 2024 and sell it today you would earn a total of  147.00  from holding Insurance Australia Group or generate 40.5% return on investment over 90 days.

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

VARIOUS EATERIES LS  vs.  Insurance Australia Group

VARIOUS EATERIES

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VARIOUS EATERIES LS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Insurance Australia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with VARIOUS EATERIES and Insurance Australia

The main advantage of trading using opposite VARIOUS EATERIES and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.