Correlation Between Aussie Broadband and EP Financial
Can any of the company-specific risk be diversified away by investing in both Aussie Broadband and EP Financial 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 Aussie Broadband and EP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aussie Broadband and EP Financial Group, you can compare the effects of market volatilities on Aussie Broadband and EP Financial 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 Aussie Broadband with a short position of EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aussie Broadband and EP Financial.
Diversification Opportunities for Aussie Broadband and EP Financial
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aussie and EP1 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aussie Broadband and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP Financial Group and Aussie Broadband 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 Aussie Broadband are associated (or correlated) with EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of Aussie Broadband i.e., Aussie Broadband and EP Financial go up and down completely randomly.
Pair Corralation between Aussie Broadband and EP Financial
Assuming the 90 days trading horizon Aussie Broadband is expected to generate 2.27 times less return on investment than EP Financial. But when comparing it to its historical volatility, Aussie Broadband is 1.37 times less risky than EP Financial. It trades about 0.03 of its potential returns per unit of risk. EP Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 50.00 in EP Financial Group on September 4, 2024 and sell it today you would earn a total of 1.00 from holding EP Financial Group or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aussie Broadband vs. EP Financial Group
Performance |
| Timeline |
| Aussie Broadband |
| EP Financial Group |
Aussie Broadband and EP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aussie Broadband and EP Financial
The main advantage of trading using opposite Aussie Broadband and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aussie Broadband position performs unexpectedly, EP Financial 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 EP Financial will offset losses from the drop in EP Financial's long position.| Aussie Broadband vs. Aneka Tambang Tbk | Aussie Broadband vs. BHP Group Limited | Aussie Broadband vs. Rio Tinto | Aussie Broadband vs. Macquarie Group Ltd |
| EP Financial vs. Westpac Banking | EP Financial vs. Ecofibre | EP Financial vs. Adriatic Metals Plc | EP Financial vs. Australian Dairy Farms |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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