Correlation Between H2O Retailing and INSURANCE AUST

Can any of the company-specific risk be diversified away by investing in both H2O Retailing and INSURANCE AUST 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 H2O Retailing and INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H2O Retailing and INSURANCE AUST GRP, you can compare the effects of market volatilities on H2O Retailing and INSURANCE AUST 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 H2O Retailing with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of H2O Retailing and INSURANCE AUST.

Diversification Opportunities for H2O Retailing and INSURANCE AUST

-0.17

Correlation Coefficient

H2O Retailing  INSURANCE AUST

Good diversification

The 3 months correlation between H2O and INSURANCE is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding H2O Retailing and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and H2O Retailing 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 H2O Retailing are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of H2O Retailing i.e., H2O Retailing and INSURANCE AUST go up and down completely randomly.

Pair Corralation between H2O Retailing and INSURANCE AUST

Assuming the 90 days horizon H2O Retailing is expected to generate 0.8 times more return on investment than INSURANCE AUST. However, H2O Retailing is 1.25 times less risky than INSURANCE AUST. It trades about 0.03 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about -0.07 per unit of risk. If you would invest  1,340  in H2O Retailing on December 22, 2024 and sell it today you would earn a total of  30.00  from holding H2O Retailing or generate 2.24% return on investment over 90 days.

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

H2O Retailing  vs.  INSURANCE AUST GRP

H2O Retailing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in H2O Retailing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, H2O Retailing is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with H2O Retailing and INSURANCE AUST

The main advantage of trading using opposite H2O Retailing and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H2O Retailing position performs unexpectedly, INSURANCE AUST 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 AUST will offset losses from the drop in INSURANCE AUST's long position.

The idea behind H2O Retailing and INSURANCE AUST GRP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.