Correlation Between Caseys General and Insurance Australia

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

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

Diversification Opportunities for Caseys General and Insurance Australia

0.87

Correlation Coefficient

Caseys General  Insurance Australia

Very poor diversification

The 3 months correlation between Caseys and Insurance is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and Insurance Australia go up and down completely randomly.

Pair Corralation between Caseys General and Insurance Australia

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 0.94 times more return on investment than Insurance Australia. However, Caseys General Stores is 1.07 times less risky than Insurance Australia. It trades about 0.14 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.12 per unit of risk. If you would invest  33,154  in Caseys General Stores on September 26, 2024 and sell it today you would earn a total of  5,246  from holding Caseys General Stores or generate 15.82% return on investment over 90 days.

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

Caseys General Stores  vs.  Insurance Australia Group

Caseys General Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Insurance Australia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Insurance Australia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caseys General and Insurance Australia

The main advantage of trading using opposite Caseys General and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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 Caseys General Stores 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.