Correlation Between Advanced Braking and South32
Can any of the company-specific risk be diversified away by investing in both Advanced Braking and South32 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 Advanced Braking and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Braking Technology and South32, you can compare the effects of market volatilities on Advanced Braking and South32 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 Advanced Braking with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and South32.
Diversification Opportunities for Advanced Braking and South32
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and South32 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Advanced Braking i.e., Advanced Braking and South32 go up and down completely randomly.
Pair Corralation between Advanced Braking and South32
Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 1.5 times more return on investment than South32. However, Advanced Braking is 1.5 times more volatile than South32. It trades about 0.06 of its potential returns per unit of risk. South32 is currently generating about 0.01 per unit of risk. If you would invest 4.40 in Advanced Braking Technology on September 3, 2024 and sell it today you would earn a total of 3.70 from holding Advanced Braking Technology or generate 84.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Braking Technology vs. South32
Performance |
| Timeline |
| Advanced Braking Tec |
| South32 |
Advanced Braking and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Braking and South32
The main advantage of trading using opposite Advanced Braking and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Braking position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Advanced Braking vs. Westpac Banking | Advanced Braking vs. Champion Iron | Advanced Braking vs. iShares Global Healthcare | Advanced Braking vs. Peel Mining |
| South32 vs. Advanced Braking Technology | South32 vs. Oneview Healthcare PLC | South32 vs. EROAD | South32 vs. Olivers Real Food |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |