Correlation Between INSURANCE AUST and Strategic Investments

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

Diversification Opportunities for INSURANCE AUST and Strategic Investments

0.19

Correlation Coefficient

INSURANCE AUST  Strategic Investments

Average diversification

The 3 months correlation between INSURANCE and Strategic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and Strategic Investments go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Strategic Investments

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to under-perform the Strategic Investments. But the stock apears to be less risky and, when comparing its historical volatility, INSURANCE AUST GRP is 3.84 times less risky than Strategic Investments. The stock trades about -0.04 of its potential returns per unit of risk. The Strategic Investments AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Strategic Investments AS on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Strategic Investments AS or generate 0.0% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  Strategic Investments AS

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 uncertain 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.

Strategic Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Strategic Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSURANCE AUST and Strategic Investments

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

The idea behind INSURANCE AUST GRP and Strategic Investments AS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.