Correlation Between Prodigy Gold and Insurance Australia

Can any of the company-specific risk be diversified away by investing in both Prodigy Gold and Insurance Australia 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 Prodigy Gold and Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prodigy Gold NL and Insurance Australia Group, you can compare the effects of market volatilities on Prodigy Gold and Insurance Australia 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 Prodigy Gold with a short position of Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prodigy Gold and Insurance Australia.

Diversification Opportunities for Prodigy Gold and Insurance Australia

-0.11

Correlation Coefficient

Prodigy Gold  Insurance Australia

Good diversification

The 3 months correlation between Prodigy and Insurance is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Prodigy Gold NL and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Prodigy Gold 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 Prodigy Gold NL are associated (or correlated) with Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Prodigy Gold i.e., Prodigy Gold and Insurance Australia go up and down completely randomly.

Pair Corralation between Prodigy Gold and Insurance Australia

Assuming the 90 days trading horizon Prodigy Gold NL is expected to generate 16.75 times more return on investment than Insurance Australia. However, Prodigy Gold is 16.75 times more volatile than Insurance Australia Group. It trades about 0.09 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.11 per unit of risk. If you would invest  0.20  in Prodigy Gold NL on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Prodigy Gold NL or generate 0.0% return on investment over 90 days.

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

Prodigy Gold NL  vs.  Insurance Australia Group

Prodigy Gold NL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prodigy Gold NL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Prodigy Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prodigy Gold and Insurance Australia

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

The idea behind Prodigy Gold NL and Insurance Australia Group 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.