Correlation Between LIFENET INSURANCE and INSURANCE AUST

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

By analyzing existing cross correlation between LIFENET INSURANCE CO and INSURANCE AUST GRP, you can compare the effects of market volatilities on LIFENET INSURANCE and INSURANCE AUST 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 LIFENET INSURANCE with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and INSURANCE AUST.

Diversification Opportunities for LIFENET INSURANCE and INSURANCE AUST

0.86

Correlation Coefficient

LIFENET INSURANCE  INSURANCE AUST

Very poor diversification

The 3 months correlation between LIFENET and INSURANCE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and LIFENET INSURANCE 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 LIFENET INSURANCE CO are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and INSURANCE AUST go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and INSURANCE AUST

Assuming the 90 days horizon LIFENET INSURANCE CO is expected to generate 0.8 times more return on investment than INSURANCE AUST. However, LIFENET INSURANCE CO is 1.25 times less risky than INSURANCE AUST. It trades about -0.03 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about -0.06 per unit of risk. If you would invest  1,080  in LIFENET INSURANCE CO on December 30, 2024 and sell it today you would lose (50.00) from holding LIFENET INSURANCE CO or give up 4.63% of portfolio value over 90 days.

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

LIFENET INSURANCE CO  vs.  INSURANCE AUST GRP

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIFENET INSURANCE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with LIFENET INSURANCE and INSURANCE AUST

The main advantage of trading using opposite LIFENET INSURANCE and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFENET INSURANCE position performs unexpectedly, INSURANCE AUST 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 AUST will offset losses from the drop in INSURANCE AUST's long position.

The idea behind LIFENET INSURANCE CO and INSURANCE AUST GRP 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.