Correlation Between Event Hospitality and Insurance Australia

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

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

Diversification Opportunities for Event Hospitality and Insurance Australia

-0.76

Correlation Coefficient

Event Hospitality  Insurance Australia

Pay attention - limited upside

The 3 months correlation between Event and Insurance is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Event Hospitality and and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Event Hospitality 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 Event Hospitality and 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 Event Hospitality i.e., Event Hospitality and Insurance Australia go up and down completely randomly.

Pair Corralation between Event Hospitality and Insurance Australia

Assuming the 90 days trading horizon Event Hospitality and is expected to generate 0.89 times more return on investment than Insurance Australia. However, Event Hospitality and is 1.12 times less risky than Insurance Australia. It trades about 0.16 of its potential returns per unit of risk. Insurance Australia Group is currently generating about -0.08 per unit of risk. If you would invest  667.00  in Event Hospitality and on December 22, 2024 and sell it today you would earn a total of  133.00  from holding Event Hospitality and or generate 19.94% return on investment over 90 days.

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

Event Hospitality and  vs.  Insurance Australia Group

Event Hospitality

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Event Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group 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.

Pair Trading with Event Hospitality and Insurance Australia

The main advantage of trading using opposite Event Hospitality and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Event Hospitality 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 Event Hospitality and 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.