Correlation Between Australian Agricultural and Aussie Broadband
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Aussie Broadband 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 Agricultural and Aussie Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Aussie Broadband, you can compare the effects of market volatilities on Australian Agricultural and Aussie Broadband 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 Agricultural with a short position of Aussie Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Aussie Broadband.
Diversification Opportunities for Australian Agricultural and Aussie Broadband
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Aussie is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Aussie Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aussie Broadband and Australian Agricultural 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 Agricultural are associated (or correlated) with Aussie Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aussie Broadband has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Aussie Broadband go up and down completely randomly.
Pair Corralation between Australian Agricultural and Aussie Broadband
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 0.66 times more return on investment than Aussie Broadband. However, Australian Agricultural is 1.51 times less risky than Aussie Broadband. It trades about -0.09 of its potential returns per unit of risk. Aussie Broadband is currently generating about -0.14 per unit of risk. If you would invest 140.00 in Australian Agricultural on August 29, 2024 and sell it today you would lose (3.00) from holding Australian Agricultural or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Aussie Broadband
Performance |
| Timeline |
| Australian Agricultural |
| Aussie Broadband |
Australian Agricultural and Aussie Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Aussie Broadband
The main advantage of trading using opposite Australian Agricultural and Aussie Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Aussie Broadband 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 Aussie Broadband will offset losses from the drop in Aussie Broadband's long position.| Australian Agricultural vs. Macquarie Technology Group | Australian Agricultural vs. Fisher Paykel Healthcare | Australian Agricultural vs. Autosports Group | Australian Agricultural vs. Nufarm Finance NZ |
| Aussie Broadband vs. Event Hospitality and | Aussie Broadband vs. Regis Healthcare | Aussie Broadband vs. Epsilon Healthcare | Aussie Broadband vs. Ainsworth Game Technology |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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