Correlation Between Insurance Australia and Wolters Kluwers

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

Diversification Opportunities for Insurance Australia and Wolters Kluwers

0.5

Correlation Coefficient

Insurance Australia  Wolters Kluwers

Very weak diversification

The 3 months correlation between Insurance and Wolters is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Wolters Kluwers Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolters Kluwers Nv 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 Wolters Kluwers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolters Kluwers Nv has no effect on the direction of Insurance Australia i.e., Insurance Australia and Wolters Kluwers go up and down completely randomly.

Pair Corralation between Insurance Australia and Wolters Kluwers

Assuming the 90 days horizon Insurance Australia Group is expected to generate 1.43 times more return on investment than Wolters Kluwers. However, Insurance Australia is 1.43 times more volatile than Wolters Kluwers Nv. It trades about -0.04 of its potential returns per unit of risk. Wolters Kluwers Nv is currently generating about -0.13 per unit of risk. If you would invest  510.00  in Insurance Australia Group on October 9, 2024 and sell it today you would lose (5.00) from holding Insurance Australia Group or give up 0.98% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  Wolters Kluwers Nv

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wolters Kluwers Nv

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wolters Kluwers Nv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Wolters Kluwers is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Insurance Australia and Wolters Kluwers

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

The idea behind Insurance Australia Group and Wolters Kluwers Nv 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.