Correlation Between Collins Foods and Insurance Australia

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

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

Diversification Opportunities for Collins Foods and Insurance Australia

-0.7

Correlation Coefficient

Collins Foods  Insurance Australia

Excellent diversification

The 3 months correlation between Collins and Insurance is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Collins Foods 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 Collins Foods 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 Collins Foods i.e., Collins Foods and Insurance Australia go up and down completely randomly.

Pair Corralation between Collins Foods and Insurance Australia

Assuming the 90 days trading horizon Collins Foods is expected to under-perform the Insurance Australia. But the stock apears to be less risky and, when comparing its historical volatility, Collins Foods is 1.35 times less risky than Insurance Australia. The stock trades about -0.41 of its potential returns per unit of risk. The Insurance Australia Group is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  865.00  in Insurance Australia Group on October 10, 2024 and sell it today you would lose (27.00) from holding Insurance Australia Group or give up 3.12% of portfolio value over 90 days.

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

Collins Foods  vs.  Insurance Australia Group

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Insurance Australia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Collins Foods and Insurance Australia

The main advantage of trading using opposite Collins Foods and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods 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 Collins Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.