Correlation Between Insurance Australia and Harvest Technology

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

Diversification Opportunities for Insurance Australia and Harvest Technology

0.89

Correlation Coefficient

Insurance Australia  Harvest Technology

Very poor diversification

The 3 months correlation between Insurance and Harvest is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Harvest Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Technology 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 Harvest Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Technology has no effect on the direction of Insurance Australia i.e., Insurance Australia and Harvest Technology go up and down completely randomly.

Pair Corralation between Insurance Australia and Harvest Technology

Assuming the 90 days trading horizon Insurance Australia is expected to generate 3.24 times less return on investment than Harvest Technology. But when comparing it to its historical volatility, Insurance Australia Group is 6.76 times less risky than Harvest Technology. It trades about 0.19 of its potential returns per unit of risk. Harvest Technology Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Harvest Technology Group on October 8, 2024 and sell it today you would earn a total of  0.50  from holding Harvest Technology Group or generate 29.41% return on investment over 90 days.

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

Insurance Australia Group  vs.  Harvest Technology Group

Insurance Australia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 14 (%) 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.

Harvest Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Technology Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Harvest Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insurance Australia and Harvest Technology

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

The idea behind Insurance Australia Group and Harvest Technology 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.