Correlation Between INSURANCE AUST and LIFENET INSURANCE

Can any of the company-specific risk be diversified away by investing in both INSURANCE AUST and LIFENET INSURANCE 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 LIFENET INSURANCE 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 LIFENET INSURANCE CO, you can compare the effects of market volatilities on INSURANCE AUST and LIFENET INSURANCE 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 LIFENET INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSURANCE AUST and LIFENET INSURANCE.

Diversification Opportunities for INSURANCE AUST and LIFENET INSURANCE

0.86

Correlation Coefficient

INSURANCE AUST  LIFENET INSURANCE

Very poor diversification

The 3 months correlation between INSURANCE and LIFENET is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between INSURANCE AUST and LIFENET INSURANCE

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to under-perform the LIFENET INSURANCE. In addition to that, INSURANCE AUST is 1.25 times more volatile than LIFENET INSURANCE CO. It trades about -0.06 of its total potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.03 per unit of volatility. If you would invest  1,080  in LIFENET INSURANCE CO on December 30, 2024 and sell it today you would lose (50.00) from holding LIFENET INSURANCE CO or give up 4.63% of portfolio value over 90 days.

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

INSURANCE AUST GRP  vs.  LIFENET INSURANCE CO

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.

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

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

Pair Trading with INSURANCE AUST and LIFENET INSURANCE

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

The idea behind INSURANCE AUST GRP and LIFENET INSURANCE CO 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.