Correlation Between Insurance Australia and PICC Property

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

Diversification Opportunities for Insurance Australia and PICC Property

-0.55

Correlation Coefficient

Insurance Australia  PICC Property

Excellent diversification

The 3 months correlation between Insurance and PICC is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and PICC Property and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PICC Property 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 PICC Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PICC Property has no effect on the direction of Insurance Australia i.e., Insurance Australia and PICC Property go up and down completely randomly.

Pair Corralation between Insurance Australia and PICC Property

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the PICC Property. In addition to that, Insurance Australia is 1.01 times more volatile than PICC Property and. It trades about -0.06 of its total potential returns per unit of risk. PICC Property and is currently generating about 0.11 per unit of volatility. If you would invest  146.00  in PICC Property and on December 29, 2024 and sell it today you would earn a total of  22.00  from holding PICC Property and or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Insurance Australia Group  vs.  PICC Property and

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.

PICC Property

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PICC Property and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PICC Property reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insurance Australia and PICC Property

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

The idea behind Insurance Australia Group and PICC Property and 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.