Correlation Between INSURANCE AUST and FIRST SAVINGS

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

Diversification Opportunities for INSURANCE AUST and FIRST SAVINGS

0.71

Correlation Coefficient

INSURANCE AUST  FIRST SAVINGS

Poor diversification

The 3 months correlation between INSURANCE and FIRST is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and FIRST SAVINGS FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SAVINGS FINL 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 FIRST SAVINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SAVINGS FINL has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and FIRST SAVINGS go up and down completely randomly.

Pair Corralation between INSURANCE AUST and FIRST SAVINGS

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 1.54 times less return on investment than FIRST SAVINGS. But when comparing it to its historical volatility, INSURANCE AUST GRP is 1.73 times less risky than FIRST SAVINGS. It trades about 0.12 of its potential returns per unit of risk. FIRST SAVINGS FINL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,958  in FIRST SAVINGS FINL on October 11, 2024 and sell it today you would earn a total of  322.00  from holding FIRST SAVINGS FINL or generate 16.45% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  FIRST SAVINGS FINL

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 weak primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FIRST SAVINGS FINL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SAVINGS FINL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, FIRST SAVINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSURANCE AUST and FIRST SAVINGS

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

The idea behind INSURANCE AUST GRP and FIRST SAVINGS FINL 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 Global Correlations module to find global opportunities by holding instruments from different markets.