Correlation Between Insurance Australia and Wheaton Precious

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

Diversification Opportunities for Insurance Australia and Wheaton Precious

0.27

Correlation Coefficient

Insurance Australia  Wheaton Precious

Modest diversification

The 3 months correlation between Insurance and Wheaton is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Insurance Australia i.e., Insurance Australia and Wheaton Precious go up and down completely randomly.

Pair Corralation between Insurance Australia and Wheaton Precious

Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.9 times more return on investment than Wheaton Precious. However, Insurance Australia Group is 1.11 times less risky than Wheaton Precious. It trades about 0.07 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.05 per unit of risk. If you would invest  458.00  in Insurance Australia Group on September 17, 2024 and sell it today you would earn a total of  34.00  from holding Insurance Australia Group or generate 7.42% 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.  Wheaton Precious Metals

Insurance Australia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wheaton Precious Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wheaton Precious 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 Wheaton Precious

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

The idea behind Insurance Australia Group and Wheaton Precious Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.