Correlation Between Australian Agricultural and Australian United
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Australian United 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 United 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 United Investment, you can compare the effects of market volatilities on Australian Agricultural and Australian United 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 United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Australian United.
Diversification Opportunities for Australian Agricultural and Australian United
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Australian and Australian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United 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 United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian United has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Australian United go up and down completely randomly.
Pair Corralation between Australian Agricultural and Australian United
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Australian United. In addition to that, Australian Agricultural is 1.45 times more volatile than Australian United Investment. It trades about -0.11 of its total potential returns per unit of risk. Australian United Investment is currently generating about -0.15 per unit of volatility. If you would invest 1,097 in Australian United Investment on September 1, 2024 and sell it today you would lose (29.00) from holding Australian United Investment or give up 2.64% 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 United Investment
Performance |
| Timeline |
| Australian Agricultural |
| Australian United |
Australian Agricultural and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Australian United
The main advantage of trading using opposite Australian Agricultural and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Australian United 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 United will offset losses from the drop in Australian United's long position.| Australian Agricultural vs. Retail Food Group | Australian Agricultural vs. Spirit Telecom | Australian Agricultural vs. Credit Clear | Australian Agricultural vs. Wt Financial Group |
| Australian United vs. Sandon Capital Investments | Australian United vs. Pinnacle Investment Management | Australian United vs. Macquarie Technology Group | Australian United vs. BKI 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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