Correlation Between Insurance Australia and Apple

Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Apple 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 Australia and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Insurance Australia Group and Apple Inc, you can compare the effects of market volatilities on Insurance Australia and Apple 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 Australia with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Apple.

Diversification Opportunities for Insurance Australia and Apple

-0.5

Correlation Coefficient

Insurance Australia  Apple

Very good diversification

The 3 months correlation between Insurance and Apple is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Insurance Australia 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 Australia Group are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Insurance Australia i.e., Insurance Australia and Apple go up and down completely randomly.

Pair Corralation between Insurance Australia and Apple

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the Apple. In addition to that, Insurance Australia is 1.55 times more volatile than Apple Inc. It trades about -0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.01 per unit of volatility. If you would invest  23,045  in Apple Inc on December 4, 2024 and sell it today you would earn a total of  50.00  from holding Apple Inc or generate 0.22% return on investment over 90 days.

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

Insurance Australia Group  vs.  Apple Inc

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Apple is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Insurance Australia and Apple

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

The idea behind Insurance Australia Group and Apple Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.