Correlation Between Australian Dairy and Betashares Global
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Betashares Global 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 Betashares Global 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 Betashares Global Shares, you can compare the effects of market volatilities on Australian Dairy and Betashares Global 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 Betashares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Betashares Global.
Diversification Opportunities for Australian Dairy and Betashares Global
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Betashares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Betashares Global Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Global Shares 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 Betashares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Global Shares has no effect on the direction of Australian Dairy i.e., Australian Dairy and Betashares Global go up and down completely randomly.
Pair Corralation between Australian Dairy and Betashares Global
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 9.48 times more return on investment than Betashares Global. However, Australian Dairy is 9.48 times more volatile than Betashares Global Shares. It trades about 0.47 of its potential returns per unit of risk. Betashares Global Shares is currently generating about 0.34 per unit of risk. If you would invest 2.20 in Australian Dairy Farms on September 2, 2024 and sell it today you would earn a total of 1.60 from holding Australian Dairy Farms or generate 72.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Betashares Global Shares
Performance |
| Timeline |
| Australian Dairy Farms |
| Betashares Global Shares |
Australian Dairy and Betashares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Betashares Global
The main advantage of trading using opposite Australian Dairy and Betashares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Betashares Global 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 Betashares Global will offset losses from the drop in Betashares Global's long position.| Australian Dairy vs. Aneka Tambang Tbk | Australian Dairy vs. Macquarie Group | Australian Dairy vs. Macquarie Group Ltd | Australian Dairy vs. BHP Group Limited |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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