Correlation Between Australian Agricultural and Wam Leaders
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Wam Leaders 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 Wam Leaders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Wam Leaders, you can compare the effects of market volatilities on Australian Agricultural and Wam Leaders 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 Wam Leaders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Wam Leaders.
Diversification Opportunities for Australian Agricultural and Wam Leaders
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Wam is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Wam Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Leaders 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 Wam Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Leaders has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Wam Leaders go up and down completely randomly.
Pair Corralation between Australian Agricultural and Wam Leaders
Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Wam Leaders. In addition to that, Australian Agricultural is 1.92 times more volatile than Wam Leaders. It trades about -0.02 of its total potential returns per unit of risk. Wam Leaders is currently generating about 0.0 per unit of volatility. If you would invest 127.00 in Wam Leaders on September 2, 2024 and sell it today you would lose (2.00) from holding Wam Leaders or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Wam Leaders
Performance |
| Timeline |
| Australian Agricultural |
| Wam Leaders |
Australian Agricultural and Wam Leaders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Wam Leaders
The main advantage of trading using opposite Australian Agricultural and Wam Leaders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Wam Leaders 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 Wam Leaders will offset losses from the drop in Wam Leaders' long position.| Australian Agricultural vs. Aneka Tambang Tbk | Australian Agricultural vs. Commonwealth Bank of | Australian Agricultural vs. Australia and New | Australian Agricultural vs. ANZ Group Holdings |
| Wam Leaders vs. Ramsay Health Care | Wam Leaders vs. My Foodie Box | Wam Leaders vs. WiseTech Global Limited | Wam Leaders vs. Health and Plant |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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