Correlation Between Australian Agricultural and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Metro Mining 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 Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Metro Mining, you can compare the effects of market volatilities on Australian Agricultural and Metro Mining 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 Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Metro Mining.
Diversification Opportunities for Australian Agricultural and Metro Mining
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Metro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro 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 Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Metro Mining go up and down completely randomly.
Pair Corralation between Australian Agricultural and Metro Mining
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Metro Mining. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 3.06 times less risky than Metro Mining. The stock trades about 0.0 of its potential returns per unit of risk. The Metro Mining is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Metro Mining on September 12, 2024 and sell it today you would earn a total of 2.50 from holding Metro Mining or generate 71.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Australian Agricultural vs. Metro Mining
Performance |
| Timeline |
| Australian Agricultural |
| Metro Mining |
Australian Agricultural and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Metro Mining
The main advantage of trading using opposite Australian Agricultural and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Australian Agricultural vs. Aurelia Metals | Australian Agricultural vs. Centuria Industrial Reit | Australian Agricultural vs. Cleanaway Waste Management | Australian Agricultural vs. Data3 |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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