Correlation Between Australian Dairy and Adriatic Metals
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Adriatic 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 Australian Dairy and Adriatic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Dairy Farms and Adriatic Metals Plc, you can compare the effects of market volatilities on Australian Dairy and Adriatic 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 Australian Dairy with a short position of Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Adriatic Metals.
Diversification Opportunities for Australian Dairy and Adriatic Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Adriatic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc and Australian Dairy 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 Dairy Farms are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of Australian Dairy i.e., Australian Dairy and Adriatic Metals go up and down completely randomly.
Pair Corralation between Australian Dairy and Adriatic Metals
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 1.89 times more return on investment than Adriatic Metals. However, Australian Dairy is 1.89 times more volatile than Adriatic Metals Plc. It trades about 0.08 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.04 per unit of risk. If you would invest 1.50 in Australian Dairy Farms on August 29, 2024 and sell it today you would earn a total of 1.50 from holding Australian Dairy Farms or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.53% |
| Values | Daily Returns |
Australian Dairy Farms vs. Adriatic Metals Plc
Performance |
| Timeline |
| Australian Dairy Farms |
| Adriatic Metals Plc |
Australian Dairy and Adriatic Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Adriatic Metals
The main advantage of trading using opposite Australian Dairy and Adriatic Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Adriatic 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 Adriatic Metals will offset losses from the drop in Adriatic Metals' long position.| Australian Dairy vs. PVW Resources | Australian Dairy vs. Woolworths | Australian Dairy vs. Wesfarmers | Australian Dairy vs. Coles Group |
| Adriatic Metals vs. Queste Communications | Adriatic Metals vs. Perseus Mining | Adriatic Metals vs. Talisman Mining | Adriatic Metals vs. Land Homes 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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