Correlation Between REVO INSURANCE and Insurance Australia

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

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

Diversification Opportunities for REVO INSURANCE and Insurance Australia

0.49

Correlation Coefficient

REVO INSURANCE  Insurance Australia

Very weak diversification

The 3 months correlation between REVO and Insurance is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and REVO 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 REVO INSURANCE SPA 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 REVO INSURANCE i.e., REVO INSURANCE and Insurance Australia go up and down completely randomly.

Pair Corralation between REVO INSURANCE and Insurance Australia

Assuming the 90 days horizon REVO INSURANCE SPA is expected to under-perform the Insurance Australia. In addition to that, REVO INSURANCE is 2.92 times more volatile than Insurance Australia Group. It trades about -0.06 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.05 per unit of volatility. If you would invest  500.00  in Insurance Australia Group on October 15, 2024 and sell it today you would earn a total of  5.00  from holding Insurance Australia Group or generate 1.0% return on investment over 90 days.

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

REVO INSURANCE SPA  vs.  Insurance Australia Group

REVO INSURANCE SPA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly uncertain basic indicators, Insurance Australia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REVO INSURANCE and Insurance Australia

The main advantage of trading using opposite REVO INSURANCE and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVO INSURANCE 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 REVO INSURANCE SPA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.