Correlation Between Insignia Financial and Coles

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

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

Diversification Opportunities for Insignia Financial and Coles

0.46

Correlation Coefficient

Insignia Financial  Coles

Very weak diversification

The 3 months correlation between Insignia and Coles is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group and Insignia Financial 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 Insignia Financial are associated (or correlated) with Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Insignia Financial i.e., Insignia Financial and Coles go up and down completely randomly.

Pair Corralation between Insignia Financial and Coles

Assuming the 90 days trading horizon Insignia Financial is expected to generate 2.74 times more return on investment than Coles. However, Insignia Financial is 2.74 times more volatile than Coles Group. It trades about 0.11 of its potential returns per unit of risk. Coles Group is currently generating about 0.1 per unit of risk. If you would invest  359.00  in Insignia Financial on December 29, 2024 and sell it today you would earn a total of  73.00  from holding Insignia Financial or generate 20.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Insignia Financial  vs.  Coles Group

Insignia Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coles Group

Risk-Adjusted Performance

OK

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

Pair Trading with Insignia Financial and Coles

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

The idea behind Insignia Financial and Coles 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.