Correlation Between INSURANCE AUST and UNIPHAR PLC

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

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

Diversification Opportunities for INSURANCE AUST and UNIPHAR PLC

-0.7

Correlation Coefficient

INSURANCE AUST  UNIPHAR PLC

Excellent diversification

The 3 months correlation between INSURANCE and UNIPHAR is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and UNIPHAR PLC EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIPHAR PLC EO and INSURANCE AUST 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 INSURANCE AUST GRP are associated (or correlated) with UNIPHAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIPHAR PLC EO has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and UNIPHAR PLC go up and down completely randomly.

Pair Corralation between INSURANCE AUST and UNIPHAR PLC

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to under-perform the UNIPHAR PLC. But the stock apears to be less risky and, when comparing its historical volatility, INSURANCE AUST GRP is 1.77 times less risky than UNIPHAR PLC. The stock trades about -0.07 of its potential returns per unit of risk. The UNIPHAR PLC EO is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  194.00  in UNIPHAR PLC EO on December 22, 2024 and sell it today you would earn a total of  66.00  from holding UNIPHAR PLC EO or generate 34.02% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  UNIPHAR PLC EO

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UNIPHAR PLC EO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIPHAR PLC EO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, UNIPHAR PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSURANCE AUST and UNIPHAR PLC

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

The idea behind INSURANCE AUST GRP and UNIPHAR PLC EO 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.