Correlation Between INSURANCE AUST and CompuGroup Medical

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

Diversification Opportunities for INSURANCE AUST and CompuGroup Medical

0.65

Correlation Coefficient

INSURANCE AUST  CompuGroup Medical

Poor diversification

The 3 months correlation between INSURANCE and CompuGroup is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and CompuGroup Medical SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompuGroup Medical 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 CompuGroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompuGroup Medical has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and CompuGroup Medical go up and down completely randomly.

Pair Corralation between INSURANCE AUST and CompuGroup Medical

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 3.74 times less return on investment than CompuGroup Medical. But when comparing it to its historical volatility, INSURANCE AUST GRP is 3.34 times less risky than CompuGroup Medical. It trades about 0.2 of its potential returns per unit of risk. CompuGroup Medical SE is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,404  in CompuGroup Medical SE on October 6, 2024 and sell it today you would earn a total of  786.00  from holding CompuGroup Medical SE or generate 55.98% 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.  CompuGroup Medical SE

INSURANCE AUST GRP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CompuGroup Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CompuGroup Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSURANCE AUST and CompuGroup Medical

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

The idea behind INSURANCE AUST GRP and CompuGroup Medical SE 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.