Correlation Between Insurance Australia and Digilife Technologies

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

Diversification Opportunities for Insurance Australia and Digilife Technologies

-0.58

Correlation Coefficient

Insurance Australia  Digilife Technologies

Excellent diversification

The 3 months correlation between Insurance and Digilife is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies 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 Digilife Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digilife Technologies has no effect on the direction of Insurance Australia i.e., Insurance Australia and Digilife Technologies go up and down completely randomly.

Pair Corralation between Insurance Australia and Digilife Technologies

Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.46 times more return on investment than Digilife Technologies. However, Insurance Australia Group is 2.15 times less risky than Digilife Technologies. It trades about 0.16 of its potential returns per unit of risk. Digilife Technologies Limited is currently generating about -0.05 per unit of risk. If you would invest  448.00  in Insurance Australia Group on October 25, 2024 and sell it today you would earn a total of  77.00  from holding Insurance Australia Group or generate 17.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Insurance Australia Group  vs.  Digilife Technologies Limited

Insurance Australia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insurance Australia reported solid returns over the last few months and may actually be approaching a breakup point.

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Insurance Australia and Digilife Technologies

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

The idea behind Insurance Australia Group and Digilife Technologies Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.