Correlation Between Australian Dairy and ETFS Physical
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and ETFS Physical 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 ETFS Physical 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 ETFS Physical Silver, you can compare the effects of market volatilities on Australian Dairy and ETFS Physical 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 ETFS Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and ETFS Physical.
Diversification Opportunities for Australian Dairy and ETFS Physical
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and ETFS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and ETFS Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Physical Silver 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 ETFS Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Physical Silver has no effect on the direction of Australian Dairy i.e., Australian Dairy and ETFS Physical go up and down completely randomly.
Pair Corralation between Australian Dairy and ETFS Physical
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 3.74 times more return on investment than ETFS Physical. However, Australian Dairy is 3.74 times more volatile than ETFS Physical Silver. It trades about 0.44 of its potential returns per unit of risk. ETFS Physical Silver is currently generating about -0.23 per unit of risk. If you would invest 2.30 in Australian Dairy Farms on September 3, 2024 and sell it today you would earn a total of 1.50 from holding Australian Dairy Farms or generate 65.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Australian Dairy Farms vs. ETFS Physical Silver
Performance |
| Timeline |
| Australian Dairy Farms |
| ETFS Physical Silver |
Australian Dairy and ETFS Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and ETFS Physical
The main advantage of trading using opposite Australian Dairy and ETFS Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, ETFS Physical 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 ETFS Physical will offset losses from the drop in ETFS Physical's long position.| Australian Dairy vs. Cooper Metals | Australian Dairy vs. OD6 Metals | Australian Dairy vs. SportsHero | Australian Dairy vs. Champion Iron |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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