Correlation Between Australian Agricultural and Sports Entertainment
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Sports Entertainment 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 Sports Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Sports Entertainment Group, you can compare the effects of market volatilities on Australian Agricultural and Sports Entertainment 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 Sports Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Sports Entertainment.
Diversification Opportunities for Australian Agricultural and Sports Entertainment
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Australian and Sports is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Sports Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Entertainment 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 Sports Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Entertainment has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Sports Entertainment go up and down completely randomly.
Pair Corralation between Australian Agricultural and Sports Entertainment
Assuming the 90 days trading horizon Australian Agricultural is expected to generate 0.15 times more return on investment than Sports Entertainment. However, Australian Agricultural is 6.76 times less risky than Sports Entertainment. It trades about -0.09 of its potential returns per unit of risk. Sports Entertainment Group is currently generating about -0.02 per unit of risk. If you would invest 139.00 in Australian Agricultural on October 11, 2024 and sell it today you would lose (2.00) from holding Australian Agricultural or give up 1.44% 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. Sports Entertainment Group
Performance |
| Timeline |
| Australian Agricultural |
| Sports Entertainment |
Australian Agricultural and Sports Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Sports Entertainment
The main advantage of trading using opposite Australian Agricultural and Sports Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Sports Entertainment 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 Sports Entertainment will offset losses from the drop in Sports Entertainment's long position.The idea behind Australian Agricultural and Sports Entertainment Group 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.
| Sports Entertainment vs. Australian Agricultural | Sports Entertainment vs. Collins Foods | Sports Entertainment vs. Charter Hall Retail | Sports Entertainment vs. Autosports 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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