Correlation Between Insurance Australia and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium, you can compare the effects of market volatilities on Insurance Australia and Plastic Omnium 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 Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Plastic Omnium.
Diversification Opportunities for Insurance Australia and Plastic Omnium
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Insurance and Plastic is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium 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 Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Insurance Australia i.e., Insurance Australia and Plastic Omnium go up and down completely randomly.
Pair Corralation between Insurance Australia and Plastic Omnium
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.67 times more return on investment than Plastic Omnium. However, Insurance Australia Group is 1.49 times less risky than Plastic Omnium. It trades about 0.09 of its potential returns per unit of risk. Plastic Omnium is currently generating about -0.02 per unit of risk. If you would invest 264.00 in Insurance Australia Group on September 26, 2024 and sell it today you would earn a total of 236.00 from holding Insurance Australia Group or generate 89.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Insurance Australia Group vs. Plastic Omnium
Performance |
Timeline |
Insurance Australia |
Plastic Omnium |
Insurance Australia and Plastic Omnium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Insurance Australia and Plastic Omnium
The main advantage of trading using opposite Insurance Australia and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, Plastic Omnium 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 Plastic Omnium will offset losses from the drop in Plastic Omnium's long position.Insurance Australia vs. DFS Furniture PLC | Insurance Australia vs. KB HOME | Insurance Australia vs. LANDSEA HOMES P | Insurance Australia vs. Texas Roadhouse |
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Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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