Correlation Between Insurance Australia and Stewart Information

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

Diversification Opportunities for Insurance Australia and Stewart Information

0.76

Correlation Coefficient

Insurance Australia  Stewart Information

Poor diversification

The 3 months correlation between Insurance and Stewart is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Stewart Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stewart Information 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 Stewart Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stewart Information has no effect on the direction of Insurance Australia i.e., Insurance Australia and Stewart Information go up and down completely randomly.

Pair Corralation between Insurance Australia and Stewart Information

Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.02 times more return on investment than Stewart Information. However, Insurance Australia is 1.02 times more volatile than Stewart Information Services. It trades about 0.19 of its potential returns per unit of risk. Stewart Information Services is currently generating about 0.03 per unit of risk. If you would invest  438.00  in Insurance Australia Group on October 6, 2024 and sell it today you would earn a total of  67.00  from holding Insurance Australia Group or generate 15.3% return on investment over 90 days.

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

Insurance Australia Group  vs.  Stewart Information Services

Insurance Australia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stewart Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stewart Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stewart Information 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 Stewart Information

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

The idea behind Insurance Australia Group and Stewart Information Services 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 Managers module to screen money managers from public funds and ETFs managed around the world.