Correlation Between Australian Agricultural and Australian Unity
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Australian Unity 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 Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Australian Unity Office, you can compare the effects of market volatilities on Australian Agricultural and Australian Unity 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 Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Australian Unity.
Diversification Opportunities for Australian Agricultural and Australian Unity
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Australian and Australian is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office 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 Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Australian Unity go up and down completely randomly.
Pair Corralation between Australian Agricultural and Australian Unity
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 0.87 times more return on investment than Australian Unity. However, Australian Agricultural is 1.15 times less risky than Australian Unity. It trades about -0.12 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.24 per unit of risk. If you would invest 141.00 in Australian Agricultural on August 30, 2024 and sell it today you would lose (4.00) from holding Australian Agricultural or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Australian Unity Office
Performance |
| Timeline |
| Australian Agricultural |
| Australian Unity Office |
Australian Agricultural and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Australian Unity
The main advantage of trading using opposite Australian Agricultural and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Australian Unity 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 Australian Unity will offset losses from the drop in Australian Unity's long position.| Australian Agricultural vs. PVW Resources | Australian Agricultural vs. Woolworths | Australian Agricultural vs. Wesfarmers | Australian Agricultural vs. Coles Group |
| Australian Unity vs. Champion Iron | Australian Unity vs. Ridley | Australian Unity vs. Peel Mining | Australian Unity vs. Australian Dairy Farms |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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