Correlation Between INSURANCE AUST and Paragon Care

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

Diversification Opportunities for INSURANCE AUST and Paragon Care

0.52

Correlation Coefficient

INSURANCE AUST  Paragon Care

Very weak diversification

The 3 months correlation between INSURANCE and Paragon is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and Paragon Care Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Care Limited 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 Paragon Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Care Limited has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and Paragon Care go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Paragon Care

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to generate 0.78 times more return on investment than Paragon Care. However, INSURANCE AUST GRP is 1.28 times less risky than Paragon Care. It trades about -0.09 of its potential returns per unit of risk. Paragon Care Limited is currently generating about -0.17 per unit of risk. If you would invest  497.00  in INSURANCE AUST GRP on December 24, 2024 and sell it today you would lose (63.00) from holding INSURANCE AUST GRP or give up 12.68% of portfolio value over 90 days.

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

INSURANCE AUST GRP  vs.  Paragon Care Limited

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 fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Paragon Care Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paragon Care Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INSURANCE AUST and Paragon Care

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

The idea behind INSURANCE AUST GRP and Paragon Care Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.