Correlation Between Austco Healthcare and Insignia Financial

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

By analyzing existing cross correlation between Austco Healthcare and Insignia Financial, you can compare the effects of market volatilities on Austco Healthcare and Insignia Financial 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 Austco Healthcare with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austco Healthcare and Insignia Financial.

Diversification Opportunities for Austco Healthcare and Insignia Financial

0.52

Correlation Coefficient

Austco Healthcare  Insignia Financial

Very weak diversification

The 3 months correlation between Austco and Insignia is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Austco Healthcare and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Austco Healthcare 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 Austco Healthcare are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Austco Healthcare i.e., Austco Healthcare and Insignia Financial go up and down completely randomly.

Pair Corralation between Austco Healthcare and Insignia Financial

Assuming the 90 days trading horizon Austco Healthcare is expected to generate 1.16 times less return on investment than Insignia Financial. In addition to that, Austco Healthcare is 1.07 times more volatile than Insignia Financial. It trades about 0.08 of its total potential returns per unit of risk. Insignia Financial is currently generating about 0.1 per unit of volatility. If you would invest  219.00  in Insignia Financial on October 9, 2024 and sell it today you would earn a total of  191.00  from holding Insignia Financial or generate 87.21% return on investment over 90 days.

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

Austco Healthcare  vs.  Insignia Financial

Austco Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Insignia Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austco Healthcare and Insignia Financial

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

The idea behind Austco Healthcare and Insignia Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.