Correlation Between Insurance Australia and Suncorp

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

Diversification Opportunities for Insurance Australia and Suncorp

0.93

Correlation Coefficient

Insurance Australia  Suncorp

Almost no diversification

The 3 months correlation between Insurance and Suncorp is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Suncorp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncorp Group 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 Suncorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncorp Group has no effect on the direction of Insurance Australia i.e., Insurance Australia and Suncorp go up and down completely randomly.

Pair Corralation between Insurance Australia and Suncorp

Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 1.06 times more return on investment than Suncorp. However, Insurance Australia is 1.06 times more volatile than Suncorp Group. It trades about 0.1 of its potential returns per unit of risk. Suncorp Group is currently generating about 0.1 per unit of risk. If you would invest  547.00  in Insurance Australia Group on October 4, 2024 and sell it today you would earn a total of  299.00  from holding Insurance Australia Group or generate 54.66% return on investment over 90 days.

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

Insurance Australia Group  vs.  Suncorp Group

Insurance Australia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 13 (%) 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.

Suncorp Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suncorp Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Suncorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Insurance Australia and Suncorp

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

The idea behind Insurance Australia Group and Suncorp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..