Correlation Between Insurance Australia and Enegex NL

Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Enegex NL 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 Enegex NL 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 Enegex NL, you can compare the effects of market volatilities on Insurance Australia and Enegex NL 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 Enegex NL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Enegex NL.

Diversification Opportunities for Insurance Australia and Enegex NL

0.02

Correlation Coefficient

Insurance Australia  Enegex NL

Significant diversification

The 3 months correlation between Insurance and Enegex is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Enegex NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enegex NL 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 Enegex NL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enegex NL has no effect on the direction of Insurance Australia i.e., Insurance Australia and Enegex NL go up and down completely randomly.

Pair Corralation between Insurance Australia and Enegex NL

Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.68 times more return on investment than Enegex NL. However, Insurance Australia Group is 1.47 times less risky than Enegex NL. It trades about -0.07 of its potential returns per unit of risk. Enegex NL is currently generating about -0.11 per unit of risk. If you would invest  837.00  in Insurance Australia Group on December 24, 2024 and sell it today you would lose (81.00) from holding Insurance Australia Group or give up 9.68% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  Enegex NL

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Enegex NL

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Insurance Australia and Enegex NL

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

The idea behind Insurance Australia Group and Enegex NL 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.