Correlation Between Australian Agricultural and Alto Metals
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Alto Metals 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 Alto Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Alto Metals, you can compare the effects of market volatilities on Australian Agricultural and Alto Metals 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 Alto Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Alto Metals.
Diversification Opportunities for Australian Agricultural and Alto Metals
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Alto is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Alto Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Metals 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 Alto Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Metals has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Alto Metals go up and down completely randomly.
Pair Corralation between Australian Agricultural and Alto Metals
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Alto Metals. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 4.17 times less risky than Alto Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Alto Metals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7.50 in Alto Metals on August 29, 2024 and sell it today you would earn a total of 1.70 from holding Alto Metals or generate 22.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Alto Metals
Performance |
| Timeline |
| Australian Agricultural |
| Alto Metals |
Australian Agricultural and Alto Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Alto Metals
The main advantage of trading using opposite Australian Agricultural and Alto Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Alto Metals 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 Alto Metals will offset losses from the drop in Alto Metals' long position.| Australian Agricultural vs. PVW Resources | Australian Agricultural vs. Woolworths | Australian Agricultural vs. Wesfarmers | Australian Agricultural vs. Coles Group |
| Alto Metals vs. Northern Star Resources | Alto Metals vs. Evolution Mining | Alto Metals vs. Bluescope Steel | Alto Metals vs. Sandfire Resources NL |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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