Correlation Between Insurance Australia and Strix Group

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

Diversification Opportunities for Insurance Australia and Strix Group

-0.25

Correlation Coefficient

Insurance Australia  Strix Group

Very good diversification

The 3 months correlation between Insurance and Strix is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Strix Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strix Group Plc 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 Strix Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strix Group Plc has no effect on the direction of Insurance Australia i.e., Insurance Australia and Strix Group go up and down completely randomly.

Pair Corralation between Insurance Australia and Strix Group

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the Strix Group. But the stock apears to be less risky and, when comparing its historical volatility, Insurance Australia Group is 1.02 times less risky than Strix Group. The stock trades about -0.06 of its potential returns per unit of risk. The Strix Group Plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Strix Group Plc on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Strix Group Plc or generate 0.0% return on investment over 90 days.

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

Insurance Australia Group  vs.  Strix Group Plc

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.

Strix Group Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strix Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Strix Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Insurance Australia and Strix Group

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

The idea behind Insurance Australia Group and Strix Group Plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.