Correlation Between Australian Dairy and BNK BankingLtd
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and BNK BankingLtd 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 BNK BankingLtd 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 BNK Banking, you can compare the effects of market volatilities on Australian Dairy and BNK BankingLtd 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 BNK BankingLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and BNK BankingLtd.
Diversification Opportunities for Australian Dairy and BNK BankingLtd
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and BNK is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and BNK Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK BankingLtd 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 BNK BankingLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK BankingLtd has no effect on the direction of Australian Dairy i.e., Australian Dairy and BNK BankingLtd go up and down completely randomly.
Pair Corralation between Australian Dairy and BNK BankingLtd
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 1.84 times more return on investment than BNK BankingLtd. However, Australian Dairy is 1.84 times more volatile than BNK Banking. It trades about 0.04 of its potential returns per unit of risk. BNK Banking is currently generating about -0.01 per unit of risk. If you would invest 3.90 in Australian Dairy Farms on November 9, 2024 and sell it today you would earn a total of 2.00 from holding Australian Dairy Farms or generate 51.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. BNK Banking
Performance |
| Timeline |
| Australian Dairy Farms |
| BNK BankingLtd |
Australian Dairy and BNK BankingLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and BNK BankingLtd
The main advantage of trading using opposite Australian Dairy and BNK BankingLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, BNK BankingLtd 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 BNK BankingLtd will offset losses from the drop in BNK BankingLtd's long position.| Australian Dairy vs. Viva Leisure | Australian Dairy vs. Centrex Metals | Australian Dairy vs. Sky Metals | Australian Dairy vs. Qbe Insurance Group |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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