Correlation Between Australian High and Betashares Australian
Can any of the company-specific risk be diversified away by investing in both Australian High and Betashares Australian 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 Australian High and Betashares Australian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian High Interest and Betashares Australian Bank, you can compare the effects of market volatilities on Australian High and Betashares Australian 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 Australian High with a short position of Betashares Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian High and Betashares Australian.
Diversification Opportunities for Australian High and Betashares Australian
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Australian and Betashares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Australian High Interest and Betashares Australian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Australian and Australian High 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 Australian High Interest are associated (or correlated) with Betashares Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Australian has no effect on the direction of Australian High i.e., Australian High and Betashares Australian go up and down completely randomly.
Pair Corralation between Australian High and Betashares Australian
Assuming the 90 days trading horizon Australian High is expected to generate 1.57 times less return on investment than Betashares Australian. But when comparing it to its historical volatility, Australian High Interest is 2.38 times less risky than Betashares Australian. It trades about 0.75 of its potential returns per unit of risk. Betashares Australian Bank is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 2,592 in Betashares Australian Bank on October 21, 2024 and sell it today you would earn a total of 13.00 from holding Betashares Australian Bank or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian High Interest vs. Betashares Australian Bank
Performance |
| Timeline |
| Australian High Interest |
| Betashares Australian |
Australian High and Betashares Australian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian High and Betashares Australian
The main advantage of trading using opposite Australian High and Betashares Australian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian High position performs unexpectedly, Betashares Australian 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 Betashares Australian will offset losses from the drop in Betashares Australian's long position.The idea behind Australian High Interest and Betashares Australian Bank 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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