Correlation Between Australian Agricultural and EROAD
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and EROAD 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 EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and EROAD, you can compare the effects of market volatilities on Australian Agricultural and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and EROAD.
Diversification Opportunities for Australian Agricultural and EROAD
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Australian and EROAD is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and EROAD go up and down completely randomly.
Pair Corralation between Australian Agricultural and EROAD
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 0.52 times more return on investment than EROAD. However, Australian Agricultural is 1.91 times less risky than EROAD. It trades about -0.02 of its potential returns per unit of risk. EROAD is currently generating about -0.07 per unit of risk. If you would invest 139.00 in Australian Agricultural on November 5, 2024 and sell it today you would lose (1.00) from holding Australian Agricultural or give up 0.72% 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. EROAD
Performance |
| Timeline |
| Australian Agricultural |
| EROAD |
Australian Agricultural and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and EROAD
The main advantage of trading using opposite Australian Agricultural and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.The idea behind Australian Agricultural and EROAD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| EROAD vs. Regal Funds Management | EROAD vs. Pearl Gull Iron | EROAD vs. Bisalloy Steel Group | EROAD vs. Tombador Iron |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |