Correlation Between American Balanced and Australian Unity
Can any of the company-specific risk be diversified away by investing in both American Balanced and Australian Unity 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 American Balanced and Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Australian Unity Ltd, you can compare the effects of market volatilities on American Balanced and Australian Unity 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 American Balanced with a short position of Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Australian Unity.
Diversification Opportunities for American Balanced and Australian Unity
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Australian is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Australian Unity Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity and American Balanced 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 American Balanced are associated (or correlated) with Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity has no effect on the direction of American Balanced i.e., American Balanced and Australian Unity go up and down completely randomly.
Pair Corralation between American Balanced and Australian Unity
Assuming the 90 days horizon American Balanced is expected to generate 0.76 times more return on investment than Australian Unity. However, American Balanced is 1.32 times less risky than Australian Unity. It trades about 0.07 of its potential returns per unit of risk. Australian Unity Ltd is currently generating about 0.01 per unit of risk. If you would invest 3,198 in American Balanced on November 3, 2024 and sell it today you would earn a total of 335.00 from holding American Balanced or generate 10.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
American Balanced vs. Australian Unity Ltd
Performance |
| Timeline |
| American Balanced |
| Australian Unity |
American Balanced and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Australian Unity
The main advantage of trading using opposite American Balanced and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Australian Unity 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 Australian Unity will offset losses from the drop in Australian Unity's long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| Australian Unity vs. COAST ENTERTAINMENT HOLDINGS | Australian Unity vs. Retail Food Group | Australian Unity vs. Southern Cross Media | Australian Unity vs. Sports Entertainment 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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