Correlation Between Insurance Australia and Event Hospitality

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

Diversification Opportunities for Insurance Australia and Event Hospitality

0.82

Correlation Coefficient

Insurance Australia  Event Hospitality

Very poor diversification

The 3 months correlation between Insurance and Event is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality 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 Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of Insurance Australia i.e., Insurance Australia and Event Hospitality go up and down completely randomly.

Pair Corralation between Insurance Australia and Event Hospitality

Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.35 times more return on investment than Event Hospitality. However, Insurance Australia is 1.35 times more volatile than Event Hospitality and. It trades about 0.11 of its potential returns per unit of risk. Event Hospitality and is currently generating about -0.04 per unit of risk. If you would invest  452.00  in Insurance Australia Group on September 22, 2024 and sell it today you would earn a total of  44.00  from holding Insurance Australia Group or generate 9.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.78%
Values	Daily Returns

Insurance Australia Group  vs.  Event Hospitality and

Insurance Australia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Event Hospitality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Event Hospitality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Insurance Australia and Event Hospitality

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

The idea behind Insurance Australia Group and Event Hospitality and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.