Correlation Between Australian Agricultural and De Grey
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and De Grey 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 De Grey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and De Grey Mining, you can compare the effects of market volatilities on Australian Agricultural and De Grey 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 De Grey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and De Grey.
Diversification Opportunities for Australian Agricultural and De Grey
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and DEG is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and De Grey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Grey Mining 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 De Grey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Grey Mining has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and De Grey go up and down completely randomly.
Pair Corralation between Australian Agricultural and De Grey
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 24.31 times less return on investment than De Grey. But when comparing it to its historical volatility, Australian Agricultural is 2.77 times less risky than De Grey. It trades about 0.02 of its potential returns per unit of risk. De Grey Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 120.00 in De Grey Mining on October 25, 2024 and sell it today you would earn a total of 82.00 from holding De Grey Mining or generate 68.33% 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. De Grey Mining
Performance |
| Timeline |
| Australian Agricultural |
| De Grey Mining |
Australian Agricultural and De Grey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and De Grey
The main advantage of trading using opposite Australian Agricultural and De Grey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, De Grey 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 De Grey will offset losses from the drop in De Grey's long position.| Australian Agricultural vs. Sky Metals | Australian Agricultural vs. Vulcan Steel | Australian Agricultural vs. Champion Iron | Australian Agricultural vs. Ironbark Capital |
| De Grey vs. Phoslock Environmental Technologies | De Grey vs. 29Metals | De Grey vs. Stelar Metals | De Grey vs. Collins Foods |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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