Correlation Between Insurance Australia and Credit Clear

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

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

Diversification Opportunities for Insurance Australia and Credit Clear

0.49

Correlation Coefficient

Insurance Australia  Credit Clear

Very weak diversification

The 3 months correlation between Insurance and Credit is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Credit Clear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Clear and Insurance Australia 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 Insurance Australia Group are associated (or correlated) with Credit Clear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Clear has no effect on the direction of Insurance Australia i.e., Insurance Australia and Credit Clear go up and down completely randomly.

Pair Corralation between Insurance Australia and Credit Clear

Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.42 times more return on investment than Credit Clear. However, Insurance Australia Group is 2.38 times less risky than Credit Clear. It trades about -0.01 of its potential returns per unit of risk. Credit Clear is currently generating about -0.03 per unit of risk. If you would invest  851.00  in Insurance Australia Group on October 3, 2024 and sell it today you would lose (5.00) from holding Insurance Australia Group or give up 0.59% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  Credit Clear

Insurance Australia

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Credit Clear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Clear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Credit Clear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Insurance Australia and Credit Clear

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

The idea behind Insurance Australia Group and Credit Clear 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.