Correlation Between Aussie Broadband and Leeuwin Metals
Can any of the company-specific risk be diversified away by investing in both Aussie Broadband and Leeuwin 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 Aussie Broadband and Leeuwin Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aussie Broadband and Leeuwin Metals, you can compare the effects of market volatilities on Aussie Broadband and Leeuwin 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 Aussie Broadband with a short position of Leeuwin Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aussie Broadband and Leeuwin Metals.
Diversification Opportunities for Aussie Broadband and Leeuwin Metals
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aussie and Leeuwin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aussie Broadband and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin Metals 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 Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of Aussie Broadband i.e., Aussie Broadband and Leeuwin Metals go up and down completely randomly.
Pair Corralation between Aussie Broadband and Leeuwin Metals
Assuming the 90 days trading horizon Aussie Broadband is expected to generate 2.48 times less return on investment than Leeuwin Metals. But when comparing it to its historical volatility, Aussie Broadband is 2.98 times less risky than Leeuwin Metals. It trades about 0.03 of its potential returns per unit of risk. Leeuwin Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Leeuwin Metals on January 21, 2025 and sell it today you would lose (9.00) from holding Leeuwin Metals or give up 30.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aussie Broadband vs. Leeuwin Metals
Performance |
| Timeline |
| Aussie Broadband |
| Leeuwin Metals |
Aussie Broadband and Leeuwin Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aussie Broadband and Leeuwin Metals
The main advantage of trading using opposite Aussie Broadband and Leeuwin Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aussie Broadband position performs unexpectedly, Leeuwin 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 Leeuwin Metals will offset losses from the drop in Leeuwin Metals' long position.| Aussie Broadband vs. Spirit Telecom | Aussie Broadband vs. Australian Unity Office | Aussie Broadband vs. Autosports Group | Aussie Broadband vs. Regis Healthcare |
| Leeuwin Metals vs. Mach7 Technologies | Leeuwin Metals vs. Orexplore Technologies | Leeuwin Metals vs. Zeotech | Leeuwin Metals vs. Genetic Technologies |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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