Correlation Between Japan Asia and INSURANCE AUST

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

By analyzing existing cross correlation between Japan Asia Investment and INSURANCE AUST GRP, you can compare the effects of market volatilities on Japan Asia and INSURANCE AUST 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 Japan Asia with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Asia and INSURANCE AUST.

Diversification Opportunities for Japan Asia and INSURANCE AUST

0.25

Correlation Coefficient

Japan Asia  INSURANCE AUST

Modest diversification

The 3 months correlation between Japan and INSURANCE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and Japan Asia 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 Japan Asia Investment are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of Japan Asia i.e., Japan Asia and INSURANCE AUST go up and down completely randomly.

Pair Corralation between Japan Asia and INSURANCE AUST

Assuming the 90 days horizon Japan Asia Investment is expected to under-perform the INSURANCE AUST. But the stock apears to be less risky and, when comparing its historical volatility, Japan Asia Investment is 1.39 times less risky than INSURANCE AUST. The stock trades about -0.31 of its potential returns per unit of risk. The INSURANCE AUST GRP is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  496.00  in INSURANCE AUST GRP on September 28, 2024 and sell it today you would lose (2.00) from holding INSURANCE AUST GRP or give up 0.4% of portfolio value over 90 days.

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

Japan Asia Investment  vs.  INSURANCE AUST GRP

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Asia and INSURANCE AUST

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

The idea behind Japan Asia Investment and INSURANCE AUST GRP 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.