Correlation Between Australian Dairy and Regal Funds
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Regal Funds 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 Regal Funds 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 Regal Funds Management, you can compare the effects of market volatilities on Australian Dairy and Regal Funds 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 Regal Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Regal Funds.
Diversification Opportunities for Australian Dairy and Regal Funds
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Regal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Regal Funds Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Funds Management 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 Regal Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Funds Management has no effect on the direction of Australian Dairy i.e., Australian Dairy and Regal Funds go up and down completely randomly.
Pair Corralation between Australian Dairy and Regal Funds
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 2.72 times more return on investment than Regal Funds. However, Australian Dairy is 2.72 times more volatile than Regal Funds Management. It trades about 0.15 of its potential returns per unit of risk. Regal Funds Management is currently generating about 0.1 per unit of risk. If you would invest 1.40 in Australian Dairy Farms on September 1, 2024 and sell it today you would earn a total of 2.40 from holding Australian Dairy Farms or generate 171.43% 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. Regal Funds Management
Performance |
| Timeline |
| Australian Dairy Farms |
| Regal Funds Management |
Australian Dairy and Regal Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Regal Funds
The main advantage of trading using opposite Australian Dairy and Regal Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Regal Funds 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 Regal Funds will offset losses from the drop in Regal Funds' long position.| Australian Dairy vs. Leeuwin Metals | Australian Dairy vs. Centaurus Metals | Australian Dairy vs. Retail Food Group | Australian Dairy vs. Diversified United Investment |
| Regal Funds vs. Ras Technology Holdings | Regal Funds vs. Macquarie Technology Group | Regal Funds vs. Bisalloy Steel Group | Regal Funds vs. Richmond Vanadium Technology |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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