Correlation Between Aussie Broadband and MotorCycle Holdings
Can any of the company-specific risk be diversified away by investing in both Aussie Broadband and MotorCycle Holdings 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 MotorCycle Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aussie Broadband and MotorCycle Holdings, you can compare the effects of market volatilities on Aussie Broadband and MotorCycle Holdings 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 MotorCycle Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aussie Broadband and MotorCycle Holdings.
Diversification Opportunities for Aussie Broadband and MotorCycle Holdings
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aussie and MotorCycle is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aussie Broadband and MotorCycle Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MotorCycle Holdings 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 MotorCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MotorCycle Holdings has no effect on the direction of Aussie Broadband i.e., Aussie Broadband and MotorCycle Holdings go up and down completely randomly.
Pair Corralation between Aussie Broadband and MotorCycle Holdings
Assuming the 90 days trading horizon Aussie Broadband is expected to generate 1.12 times more return on investment than MotorCycle Holdings. However, Aussie Broadband is 1.12 times more volatile than MotorCycle Holdings. It trades about 0.28 of its potential returns per unit of risk. MotorCycle Holdings is currently generating about -0.34 per unit of risk. If you would invest 354.00 in Aussie Broadband on November 4, 2024 and sell it today you would earn a total of 40.00 from holding Aussie Broadband or generate 11.3% 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. MotorCycle Holdings
Performance |
| Timeline |
| Aussie Broadband |
| MotorCycle Holdings |
Aussie Broadband and MotorCycle Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aussie Broadband and MotorCycle Holdings
The main advantage of trading using opposite Aussie Broadband and MotorCycle Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aussie Broadband position performs unexpectedly, MotorCycle Holdings 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 MotorCycle Holdings will offset losses from the drop in MotorCycle Holdings' long position.| Aussie Broadband vs. Peel Mining | Aussie Broadband vs. Collins Foods | Aussie Broadband vs. Dexus Convenience Retail | Aussie Broadband vs. Black Rock Mining |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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