Correlation Between Insurance Australia and CSSC Offshore

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

Diversification Opportunities for Insurance Australia and CSSC Offshore

-0.14

Correlation Coefficient

Insurance Australia  CSSC Offshore

Good diversification

The 3 months correlation between Insurance and CSSC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Insurance Australia i.e., Insurance Australia and CSSC Offshore go up and down completely randomly.

Pair Corralation between Insurance Australia and CSSC Offshore

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the CSSC Offshore. In addition to that, Insurance Australia is 1.56 times more volatile than CSSC Offshore Marine. It trades about -0.04 of its total potential returns per unit of risk. CSSC Offshore Marine is currently generating about -0.03 per unit of volatility. If you would invest  126.00  in CSSC Offshore Marine on December 1, 2024 and sell it today you would lose (4.00) from holding CSSC Offshore Marine or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Insurance Australia Group  vs.  CSSC Offshore Marine

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.

CSSC Offshore Marine

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSSC Offshore Marine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CSSC Offshore 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 CSSC Offshore

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

The idea behind Insurance Australia Group and CSSC Offshore Marine 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.