Correlation Between Insurance Australia and OPERA SOFTWARE

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

Diversification Opportunities for Insurance Australia and OPERA SOFTWARE

0.38

Correlation Coefficient

Insurance Australia  OPERA SOFTWARE

Weak diversification

The 3 months correlation between Insurance and OPERA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and OPERA SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPERA SOFTWARE 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 OPERA SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPERA SOFTWARE has no effect on the direction of Insurance Australia i.e., Insurance Australia and OPERA SOFTWARE go up and down completely randomly.

Pair Corralation between Insurance Australia and OPERA SOFTWARE

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the OPERA SOFTWARE. In addition to that, Insurance Australia is 1.29 times more volatile than OPERA SOFTWARE. It trades about -0.08 of its total potential returns per unit of risk. OPERA SOFTWARE is currently generating about 0.07 per unit of volatility. If you would invest  62.00  in OPERA SOFTWARE on December 22, 2024 and sell it today you would earn a total of  4.00  from holding OPERA SOFTWARE or generate 6.45% 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.  OPERA SOFTWARE

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.

OPERA SOFTWARE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPERA SOFTWARE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, OPERA SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Insurance Australia and OPERA SOFTWARE

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

The idea behind Insurance Australia Group and OPERA SOFTWARE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.