Correlation Between Insurance Australia and Citycon Oyj

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

Diversification Opportunities for Insurance Australia and Citycon Oyj

-0.72

Correlation Coefficient

Insurance Australia  Citycon Oyj

Pay attention - limited upside

The 3 months correlation between Insurance and Citycon is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Citycon Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citycon Oyj 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 Citycon Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citycon Oyj has no effect on the direction of Insurance Australia i.e., Insurance Australia and Citycon Oyj go up and down completely randomly.

Pair Corralation between Insurance Australia and Citycon Oyj

Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.96 times more return on investment than Citycon Oyj. However, Insurance Australia Group is 1.04 times less risky than Citycon Oyj. It trades about 0.08 of its potential returns per unit of risk. Citycon Oyj is currently generating about -0.05 per unit of risk. If you would invest  280.00  in Insurance Australia Group on October 11, 2024 and sell it today you would earn a total of  225.00  from holding Insurance Australia Group or generate 80.36% return on investment over 90 days.

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

Insurance Australia Group  vs.  Citycon Oyj

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 fragile basic indicators, Insurance Australia reported solid returns over the last few months and may actually be approaching a breakup point.

Citycon Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citycon Oyj 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.

Pair Trading with Insurance Australia and Citycon Oyj

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

The idea behind Insurance Australia Group and Citycon Oyj 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 Stocks Directory module to find actively traded stocks across global markets.