Correlation Between Australian Agricultural and Mach7 Technologies
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Mach7 Technologies 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 Mach7 Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Mach7 Technologies, you can compare the effects of market volatilities on Australian Agricultural and Mach7 Technologies 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 Mach7 Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Mach7 Technologies.
Diversification Opportunities for Australian Agricultural and Mach7 Technologies
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Australian and Mach7 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Mach7 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach7 Technologies 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 Mach7 Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach7 Technologies has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Mach7 Technologies go up and down completely randomly.
Pair Corralation between Australian Agricultural and Mach7 Technologies
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 8.45 times less return on investment than Mach7 Technologies. But when comparing it to its historical volatility, Australian Agricultural is 4.01 times less risky than Mach7 Technologies. It trades about 0.03 of its potential returns per unit of risk. Mach7 Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 39.00 in Mach7 Technologies on November 3, 2024 and sell it today you would earn a total of 2.00 from holding Mach7 Technologies or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Mach7 Technologies
Performance |
| Timeline |
| Australian Agricultural |
| Mach7 Technologies |
Australian Agricultural and Mach7 Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Mach7 Technologies
The main advantage of trading using opposite Australian Agricultural and Mach7 Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Mach7 Technologies 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 Mach7 Technologies will offset losses from the drop in Mach7 Technologies' long position.| Australian Agricultural vs. Bisalloy Steel Group | Australian Agricultural vs. M3 Mining | Australian Agricultural vs. Ora Banda Mining | Australian Agricultural vs. Legacy Iron Ore |
| Mach7 Technologies vs. Sequoia Financial Group | Mach7 Technologies vs. Insurance Australia Group | Mach7 Technologies vs. Bell Financial Group | Mach7 Technologies vs. EVE Health Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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