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

0.17

Correlation Coefficient

Insurance Australia  CSSC Offshore

Average diversification

The 3 months correlation between Insurance and CSSC is 0.17. 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 generate 0.92 times more return on investment than CSSC Offshore. However, Insurance Australia Group is 1.09 times less risky than CSSC Offshore. It trades about 0.02 of its potential returns per unit of risk. CSSC Offshore Marine is currently generating about -0.06 per unit of risk. If you would invest  433.00  in Insurance Australia Group on December 30, 2024 and sell it today you would earn a total of  13.00  from holding Insurance Australia Group or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
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 uncertain 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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.