Correlation Between SAN MIGUEL and INSURANCE AUST

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

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

Diversification Opportunities for SAN MIGUEL and INSURANCE AUST

-0.59

Correlation Coefficient

SAN MIGUEL  INSURANCE AUST

Excellent diversification

The 3 months correlation between SAN and INSURANCE is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY 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 SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and INSURANCE AUST go up and down completely randomly.

Pair Corralation between SAN MIGUEL and INSURANCE AUST

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to under-perform the INSURANCE AUST. In addition to that, SAN MIGUEL is 1.32 times more volatile than INSURANCE AUST GRP. It trades about -0.24 of its total potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.04 per unit of volatility. If you would invest  500.00  in INSURANCE AUST GRP on October 11, 2024 and sell it today you would earn a total of  5.00  from holding INSURANCE AUST GRP or generate 1.0% return on investment over 90 days.

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

SAN MIGUEL BREWERY  vs.  INSURANCE AUST GRP

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 February 2025.

Pair Trading with SAN MIGUEL and INSURANCE AUST

The main advantage of trading using opposite SAN MIGUEL and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL 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 SAN MIGUEL BREWERY 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.