Correlation Between Insurance Australia and Fast Retailing

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

Diversification Opportunities for Insurance Australia and Fast Retailing

0.64

Correlation Coefficient

Insurance Australia  Fast Retailing

Poor diversification

The 3 months correlation between Insurance and Fast is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Insurance Australia i.e., Insurance Australia and Fast Retailing go up and down completely randomly.

Pair Corralation between Insurance Australia and Fast Retailing

Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.32 times more return on investment than Fast Retailing. However, Insurance Australia is 1.32 times more volatile than Fast Retailing Co. It trades about -0.07 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.13 per unit of risk. If you would invest  492.00  in Insurance Australia Group on December 27, 2024 and sell it today you would lose (52.00) from holding Insurance Australia Group or give up 10.57% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  Fast Retailing Co

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.

Fast Retailing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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.

Pair Trading with Insurance Australia and Fast Retailing

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

The idea behind Insurance Australia Group and Fast Retailing Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..