Correlation Between Digilife Technologies and Insurance Australia

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

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

Diversification Opportunities for Digilife Technologies and Insurance Australia

0.53

Correlation Coefficient

Digilife Technologies  Insurance Australia

Very weak diversification

The 3 months correlation between Digilife and Insurance is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Digilife Technologies Limited and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Digilife Technologies 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 Digilife Technologies Limited are associated (or correlated) with Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Digilife Technologies i.e., Digilife Technologies and Insurance Australia go up and down completely randomly.

Pair Corralation between Digilife Technologies and Insurance Australia

Assuming the 90 days trading horizon Digilife Technologies Limited is expected to under-perform the Insurance Australia. In addition to that, Digilife Technologies is 1.74 times more volatile than Insurance Australia Group. It trades about -0.08 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about -0.08 per unit of volatility. If you would invest  492.00  in Insurance Australia Group on December 23, 2024 and sell it today you would lose (62.00) from holding Insurance Australia Group or give up 12.6% of portfolio value over 90 days.

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

Digilife Technologies Limited  vs.  Insurance Australia Group

Digilife Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Digilife Technologies and Insurance Australia

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

The idea behind Digilife Technologies Limited and Insurance Australia 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.