Correlation Between PERENNIAL ENERGY and INSURANCE AUST

Can any of the company-specific risk be diversified away by investing in both PERENNIAL ENERGY and INSURANCE AUST 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 PERENNIAL ENERGY and INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PERENNIAL ENERGY HD 01 and INSURANCE AUST GRP, you can compare the effects of market volatilities on PERENNIAL ENERGY and INSURANCE AUST 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 PERENNIAL ENERGY with a short position of INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of PERENNIAL ENERGY and INSURANCE AUST.

Diversification Opportunities for PERENNIAL ENERGY and INSURANCE AUST

-0.09

Correlation Coefficient

PERENNIAL ENERGY  INSURANCE AUST

Good diversification

The 3 months correlation between PERENNIAL and INSURANCE is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PERENNIAL ENERGY HD 01 and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and PERENNIAL ENERGY 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 PERENNIAL ENERGY HD 01 are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of PERENNIAL ENERGY i.e., PERENNIAL ENERGY and INSURANCE AUST go up and down completely randomly.

Pair Corralation between PERENNIAL ENERGY and INSURANCE AUST

Assuming the 90 days horizon PERENNIAL ENERGY HD 01 is expected to generate 3.1 times more return on investment than INSURANCE AUST. However, PERENNIAL ENERGY is 3.1 times more volatile than INSURANCE AUST GRP. It trades about 0.05 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.09 per unit of risk. If you would invest  5.10  in PERENNIAL ENERGY HD 01 on September 23, 2024 and sell it today you would earn a total of  4.80  from holding PERENNIAL ENERGY HD 01 or generate 94.12% return on investment over 90 days.

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

PERENNIAL ENERGY HD 01  vs.  INSURANCE AUST GRP

PERENNIAL ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PERENNIAL ENERGY HD 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PERENNIAL ENERGY and INSURANCE AUST

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

The idea behind PERENNIAL ENERGY HD 01 and INSURANCE AUST GRP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.