Correlation Between Insignia Financial and Origin Energy

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

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

Diversification Opportunities for Insignia Financial and Origin Energy

0.56

Correlation Coefficient

Insignia Financial  Origin Energy

Very weak diversification

The 3 months correlation between Insignia and Origin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and Origin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Energy 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 Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of Insignia Financial i.e., Insignia Financial and Origin Energy go up and down completely randomly.

Pair Corralation between Insignia Financial and Origin Energy

Assuming the 90 days trading horizon Insignia Financial is expected to generate 6.56 times more return on investment than Origin Energy. However, Insignia Financial is 6.56 times more volatile than Origin Energy. It trades about 0.33 of its potential returns per unit of risk. Origin Energy is currently generating about 0.34 per unit of risk. If you would invest  358.00  in Insignia Financial on October 22, 2024 and sell it today you would earn a total of  85.00  from holding Insignia Financial or generate 23.74% return on investment over 90 days.

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

Insignia Financial  vs.  Origin Energy

Insignia Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 15 (%) 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.

Origin Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Origin Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insignia Financial and Origin Energy

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

The idea behind Insignia Financial and Origin Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.