Correlation Between Australian Agricultural and National Australia
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and National Australia 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 National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and National Australia Bank, you can compare the effects of market volatilities on Australian Agricultural and National Australia 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 National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and National Australia.
Diversification Opportunities for Australian Agricultural and National Australia
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Australian and National is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank 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 National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and National Australia go up and down completely randomly.
Pair Corralation between Australian Agricultural and National Australia
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 4.4 times more return on investment than National Australia. However, Australian Agricultural is 4.4 times more volatile than National Australia Bank. It trades about -0.03 of its potential returns per unit of risk. National Australia Bank is currently generating about -0.17 per unit of risk. If you would invest 138.00 in Australian Agricultural on September 14, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. National Australia Bank
Performance |
| Timeline |
| Australian Agricultural |
| National Australia Bank |
Australian Agricultural and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and National Australia
The main advantage of trading using opposite Australian Agricultural and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, National Australia 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 National Australia will offset losses from the drop in National Australia's long position.| Australian Agricultural vs. Aneka Tambang Tbk | Australian Agricultural vs. Macquarie Group | Australian Agricultural vs. Macquarie Group Ltd | Australian Agricultural vs. Challenger |
| National Australia vs. Stelar Metals | National Australia vs. Air New Zealand | National Australia vs. Global Data Centre | National Australia vs. Actinogen Medical |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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