Correlation Between Australian Bond and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Australian Bond and Australian Agricultural 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 Australian Bond and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Bond Exchange and Australian Agricultural, you can compare the effects of market volatilities on Australian Bond and Australian Agricultural 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 Australian Bond with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Bond and Australian Agricultural.
Diversification Opportunities for Australian Bond and Australian Agricultural
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Australian and Australian is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Australian Bond Exchange and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Australian Bond 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 Australian Bond Exchange are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Australian Bond i.e., Australian Bond and Australian Agricultural go up and down completely randomly.
Pair Corralation between Australian Bond and Australian Agricultural
Assuming the 90 days trading horizon Australian Bond Exchange is expected to generate 6.26 times more return on investment than Australian Agricultural. However, Australian Bond is 6.26 times more volatile than Australian Agricultural. It trades about 0.03 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.09 per unit of risk. If you would invest 3.00 in Australian Bond Exchange on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Australian Bond Exchange or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Bond Exchange vs. Australian Agricultural
Performance |
| Timeline |
| Australian Bond Exchange |
| Australian Agricultural |
Australian Bond and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Bond and Australian Agricultural
The main advantage of trading using opposite Australian Bond and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Bond position performs unexpectedly, Australian Agricultural 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 Agricultural will offset losses from the drop in Australian Agricultural's long position.| Australian Bond vs. Renascor Resources | Australian Bond vs. Venus Metals | Australian Bond vs. Havilah Resources | Australian Bond vs. Asara Resources |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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