Correlation Between Australian Agricultural and VanEck FTSE
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and VanEck FTSE 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 VanEck FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and VanEck FTSE Global, you can compare the effects of market volatilities on Australian Agricultural and VanEck FTSE 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 VanEck FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and VanEck FTSE.
Diversification Opportunities for Australian Agricultural and VanEck FTSE
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Australian and VanEck is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and VanEck FTSE Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck FTSE Global 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 VanEck FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck FTSE Global has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and VanEck FTSE go up and down completely randomly.
Pair Corralation between Australian Agricultural and VanEck FTSE
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the VanEck FTSE. In addition to that, Australian Agricultural is 2.36 times more volatile than VanEck FTSE Global. It trades about -0.05 of its total potential returns per unit of risk. VanEck FTSE Global is currently generating about 0.14 per unit of volatility. If you would invest 2,034 in VanEck FTSE Global on August 30, 2024 and sell it today you would earn a total of 254.00 from holding VanEck FTSE Global or generate 12.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. VanEck FTSE Global
Performance |
| Timeline |
| Australian Agricultural |
| VanEck FTSE Global |
Australian Agricultural and VanEck FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and VanEck FTSE
The main advantage of trading using opposite Australian Agricultural and VanEck FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, VanEck FTSE 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 VanEck FTSE will offset losses from the drop in VanEck FTSE's long position.| Australian Agricultural vs. Champion Iron | Australian Agricultural vs. Lendlease Group | Australian Agricultural vs. Iron Road | Australian Agricultural vs. Legacy Iron Ore |
| VanEck FTSE vs. ETFS Morningstar Global | VanEck FTSE vs. BetaShares Geared Equity | VanEck FTSE vs. VanEck Vectors Australian | VanEck FTSE vs. SPDR SPASX 200 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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