Correlation Between Australian Dairy and Marmota Energy
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Marmota Energy 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 Marmota Energy 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 Marmota Energy, you can compare the effects of market volatilities on Australian Dairy and Marmota Energy 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 Marmota Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Marmota Energy.
Diversification Opportunities for Australian Dairy and Marmota Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Australian and Marmota is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Marmota Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marmota Energy 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 Marmota Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marmota Energy has no effect on the direction of Australian Dairy i.e., Australian Dairy and Marmota Energy go up and down completely randomly.
Pair Corralation between Australian Dairy and Marmota Energy
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 1.61 times more return on investment than Marmota Energy. However, Australian Dairy is 1.61 times more volatile than Marmota Energy. It trades about 0.06 of its potential returns per unit of risk. Marmota Energy is currently generating about 0.02 per unit of risk. If you would invest 2.10 in Australian Dairy Farms on September 12, 2024 and sell it today you would earn a total of 1.90 from holding Australian Dairy Farms or generate 90.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Marmota Energy
Performance |
| Timeline |
| Australian Dairy Farms |
| Marmota Energy |
Australian Dairy and Marmota Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Marmota Energy
The main advantage of trading using opposite Australian Dairy and Marmota Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Marmota Energy 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 Marmota Energy will offset losses from the drop in Marmota Energy's long position.| Australian Dairy vs. Group 6 Metals | Australian Dairy vs. Richmond Vanadium Technology | Australian Dairy vs. DY6 Metals | Australian Dairy vs. Strickland Metals |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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