Correlation Between AIC Mines and Insurance Australia

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

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

Diversification Opportunities for AIC Mines and Insurance Australia

-0.61

Correlation Coefficient

AIC Mines  Insurance Australia

Excellent diversification

The 3 months correlation between AIC and Insurance is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AIC Mines Limited and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and AIC Mines 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 AIC Mines Limited 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 AIC Mines i.e., AIC Mines and Insurance Australia go up and down completely randomly.

Pair Corralation between AIC Mines and Insurance Australia

Assuming the 90 days trading horizon AIC Mines Limited is expected to under-perform the Insurance Australia. In addition to that, AIC Mines is 2.98 times more volatile than Insurance Australia Group. It trades about -0.03 of its total potential returns per unit of risk. Insurance Australia Group is currently generating about 0.18 per unit of volatility. If you would invest  741.00  in Insurance Australia Group on September 26, 2024 and sell it today you would earn a total of  109.00  from holding Insurance Australia Group or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

AIC Mines Limited  vs.  Insurance Australia Group

AIC Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIC Mines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Insurance Australia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIC Mines and Insurance Australia

The main advantage of trading using opposite AIC Mines and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIC Mines 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 AIC Mines Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.