Correlation Between Australian Dairy and Austral Gold
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Austral Gold 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 Austral Gold 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 Austral Gold, you can compare the effects of market volatilities on Australian Dairy and Austral Gold 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 Austral Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Austral Gold.
Diversification Opportunities for Australian Dairy and Austral Gold
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Australian and Austral is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Austral Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austral Gold 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 Austral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austral Gold has no effect on the direction of Australian Dairy i.e., Australian Dairy and Austral Gold go up and down completely randomly.
Pair Corralation between Australian Dairy and Austral Gold
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 0.62 times more return on investment than Austral Gold. However, Australian Dairy Farms is 1.62 times less risky than Austral Gold. It trades about 0.31 of its potential returns per unit of risk. Austral Gold is currently generating about 0.01 per unit of risk. If you would invest 2.10 in Australian Dairy Farms on August 27, 2024 and sell it today you would earn a total of 0.70 from holding Australian Dairy Farms or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Austral Gold
Performance |
| Timeline |
| Australian Dairy Farms |
| Austral Gold |
Australian Dairy and Austral Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Austral Gold
The main advantage of trading using opposite Australian Dairy and Austral Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Austral Gold 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 Austral Gold will offset losses from the drop in Austral Gold's long position.| Australian Dairy vs. Aneka Tambang Tbk | Australian Dairy vs. Commonwealth Bank | Australian Dairy vs. Commonwealth Bank of | Australian Dairy vs. Australia and New |
| Austral Gold vs. Northern Star Resources | Austral Gold vs. Evolution Mining | Austral Gold vs. Bluescope Steel | Austral Gold vs. Sandfire Resources NL |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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