Correlation Between Australian Dairy and Bank of Queensland
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Bank of Queensland 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 Bank of Queensland 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 Bank of Queensland, you can compare the effects of market volatilities on Australian Dairy and Bank of Queensland 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 Bank of Queensland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Bank of Queensland.
Diversification Opportunities for Australian Dairy and Bank of Queensland
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Bank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Bank of Queensland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Queensland 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 Bank of Queensland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Queensland has no effect on the direction of Australian Dairy i.e., Australian Dairy and Bank of Queensland go up and down completely randomly.
Pair Corralation between Australian Dairy and Bank of Queensland
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 20.68 times more return on investment than Bank of Queensland. However, Australian Dairy is 20.68 times more volatile than Bank of Queensland. It trades about 0.36 of its potential returns per unit of risk. Bank of Queensland is currently generating about -0.01 per unit of risk. If you would invest 2.10 in Australian Dairy Farms on August 29, 2024 and sell it today you would earn a total of 0.90 from holding Australian Dairy Farms or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Australian Dairy Farms vs. Bank of Queensland
Performance |
| Timeline |
| Australian Dairy Farms |
| Bank of Queensland |
Australian Dairy and Bank of Queensland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Bank of Queensland
The main advantage of trading using opposite Australian Dairy and Bank of Queensland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Bank of Queensland 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 Bank of Queensland will offset losses from the drop in Bank of Queensland's long position.| Australian Dairy vs. PVW Resources | Australian Dairy vs. Woolworths | Australian Dairy vs. Wesfarmers | Australian Dairy vs. Coles Group |
| Bank of Queensland vs. Champion Iron | Bank of Queensland vs. Ridley | Bank of Queensland vs. Peel Mining | Bank of Queensland vs. Australian Dairy Farms |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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