Correlation Between Australian Agricultural and Strickland Metals
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Strickland Metals 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 Strickland Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Strickland Metals, you can compare the effects of market volatilities on Australian Agricultural and Strickland Metals 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 Strickland Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Strickland Metals.
Diversification Opportunities for Australian Agricultural and Strickland Metals
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Australian and Strickland is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland Metals 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 Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Strickland Metals go up and down completely randomly.
Pair Corralation between Australian Agricultural and Strickland Metals
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Strickland Metals. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 3.86 times less risky than Strickland Metals. The stock trades about -0.11 of its potential returns per unit of risk. The Strickland Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7.60 in Strickland Metals on September 1, 2024 and sell it today you would earn a total of 0.40 from holding Strickland Metals or generate 5.26% 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. Strickland Metals
Performance |
| Timeline |
| Australian Agricultural |
| Strickland Metals |
Australian Agricultural and Strickland Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Strickland Metals
The main advantage of trading using opposite Australian Agricultural and Strickland Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Strickland Metals 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 Strickland Metals will offset losses from the drop in Strickland Metals' long position.| Australian Agricultural vs. Retail Food Group | Australian Agricultural vs. Spirit Telecom | Australian Agricultural vs. Credit Clear | Australian Agricultural vs. Wt Financial Group |
| Strickland Metals vs. Australian Unity Office | Strickland Metals vs. Red Hill Iron | Strickland Metals vs. Ironbark Capital | Strickland Metals vs. Legacy Iron Ore |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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