Correlation Between Australian Foundation and Hotel Property
Can any of the company-specific risk be diversified away by investing in both Australian Foundation and Hotel Property 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 Foundation and Hotel Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Foundation Investment and Hotel Property Investments, you can compare the effects of market volatilities on Australian Foundation and Hotel Property 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 Foundation with a short position of Hotel Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Foundation and Hotel Property.
Diversification Opportunities for Australian Foundation and Hotel Property
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Hotel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Australian Foundation Investme and Hotel Property Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Property Inves and Australian Foundation 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 Foundation Investment are associated (or correlated) with Hotel Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Property Inves has no effect on the direction of Australian Foundation i.e., Australian Foundation and Hotel Property go up and down completely randomly.
Pair Corralation between Australian Foundation and Hotel Property
Assuming the 90 days trading horizon Australian Foundation is expected to generate 1.94 times less return on investment than Hotel Property. But when comparing it to its historical volatility, Australian Foundation Investment is 1.82 times less risky than Hotel Property. It trades about 0.31 of its potential returns per unit of risk. Hotel Property Investments is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 361.00 in Hotel Property Investments on September 13, 2024 and sell it today you would earn a total of 17.00 from holding Hotel Property Investments or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Foundation Investme vs. Hotel Property Investments
Performance |
| Timeline |
| Australian Foundation |
| Hotel Property Inves |
Australian Foundation and Hotel Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Foundation and Hotel Property
The main advantage of trading using opposite Australian Foundation and Hotel Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Foundation position performs unexpectedly, Hotel Property 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 Hotel Property will offset losses from the drop in Hotel Property's long position.| Australian Foundation vs. Retail Food Group | Australian Foundation vs. Carnegie Clean Energy | Australian Foundation vs. Aristocrat Leisure | Australian Foundation vs. Cleanaway Waste Management |
| Hotel Property vs. Scentre Group | Hotel Property vs. Vicinity Centres Re | Hotel Property vs. Charter Hall Retail | Hotel Property vs. Cromwell Property Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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