Correlation Between Enegex NL and Insurance Australia

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

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

Diversification Opportunities for Enegex NL and Insurance Australia

-0.65

Correlation Coefficient

Enegex NL  Insurance Australia

Excellent diversification

The 3 months correlation between Enegex and Insurance is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Enegex NL and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Enegex NL 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 Enegex NL 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 Enegex NL i.e., Enegex NL and Insurance Australia go up and down completely randomly.

Pair Corralation between Enegex NL and Insurance Australia

Assuming the 90 days trading horizon Enegex NL is expected to generate 1.08 times more return on investment than Insurance Australia. However, Enegex NL is 1.08 times more volatile than Insurance Australia Group. It trades about 0.21 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.03 per unit of risk. If you would invest  1.40  in Enegex NL on September 23, 2024 and sell it today you would earn a total of  0.10  from holding Enegex NL or generate 7.14% return on investment over 90 days.

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

Enegex NL  vs.  Insurance Australia Group

Enegex NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enegex NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enegex NL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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. 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 January 2025.

Pair Trading with Enegex NL and Insurance Australia

The main advantage of trading using opposite Enegex NL and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enegex NL 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 Enegex NL 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.