Correlation Between Australian Dairy and Peel Mining
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Peel Mining 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 Peel Mining 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 Peel Mining, you can compare the effects of market volatilities on Australian Dairy and Peel Mining 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 Peel Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Peel Mining.
Diversification Opportunities for Australian Dairy and Peel Mining
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Australian and Peel is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Peel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining has no effect on the direction of Australian Dairy i.e., Australian Dairy and Peel Mining go up and down completely randomly.
Pair Corralation between Australian Dairy and Peel Mining
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 1.57 times more return on investment than Peel Mining. However, Australian Dairy is 1.57 times more volatile than Peel Mining. It trades about 0.31 of its potential returns per unit of risk. Peel Mining is currently generating about -0.11 per unit of risk. If you would invest 2.10 in Australian Dairy Farms on August 27, 2024 and sell it today you would earn a total of 0.70 from holding Australian Dairy Farms or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Peel Mining
Performance |
| Timeline |
| Australian Dairy Farms |
| Peel Mining |
Australian Dairy and Peel Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Peel Mining
The main advantage of trading using opposite Australian Dairy and Peel Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Peel Mining 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 Peel Mining will offset losses from the drop in Peel Mining's long position.| Australian Dairy vs. Aneka Tambang Tbk | Australian Dairy vs. Commonwealth Bank | Australian Dairy vs. Commonwealth Bank of | Australian Dairy vs. Australia and New |
| Peel Mining vs. Mayfield Childcare | Peel Mining vs. Kip McGrath Education | Peel Mining vs. Hudson Investment Group | Peel Mining vs. Dexus Convenience Retail |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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