Correlation Between Aussie Broadband and EROAD
Can any of the company-specific risk be diversified away by investing in both Aussie Broadband and EROAD 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 EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aussie Broadband and EROAD, you can compare the effects of market volatilities on Aussie Broadband and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aussie Broadband and EROAD.
Diversification Opportunities for Aussie Broadband and EROAD
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aussie and EROAD is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aussie Broadband and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Aussie Broadband i.e., Aussie Broadband and EROAD go up and down completely randomly.
Pair Corralation between Aussie Broadband and EROAD
Assuming the 90 days trading horizon Aussie Broadband is expected to generate 3.81 times less return on investment than EROAD. But when comparing it to its historical volatility, Aussie Broadband is 1.97 times less risky than EROAD. It trades about 0.03 of its potential returns per unit of risk. EROAD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 44.00 in EROAD on August 29, 2024 and sell it today you would earn a total of 40.00 from holding EROAD or generate 90.91% 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. EROAD
Performance |
| Timeline |
| Aussie Broadband |
| EROAD |
Aussie Broadband and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aussie Broadband and EROAD
The main advantage of trading using opposite Aussie Broadband and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aussie Broadband position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| Aussie Broadband vs. Event Hospitality and | Aussie Broadband vs. Regis Healthcare | Aussie Broadband vs. Epsilon Healthcare | Aussie Broadband vs. Ainsworth Game Technology |
| EROAD vs. Navigator Global Investments | EROAD vs. Super Retail Group | EROAD vs. Regal Investment | EROAD vs. Australian United Investment |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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