Correlation Between Alternative Investment and Australian Dairy
Can any of the company-specific risk be diversified away by investing in both Alternative Investment and Australian Dairy 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 Alternative Investment and Australian Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Investment Trust and Australian Dairy Farms, you can compare the effects of market volatilities on Alternative Investment and Australian Dairy 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 Alternative Investment with a short position of Australian Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Investment and Australian Dairy.
Diversification Opportunities for Alternative Investment and Australian Dairy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alternative and Australian is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and Australian Dairy Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dairy Farms and Alternative Investment 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 Alternative Investment Trust are associated (or correlated) with Australian Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dairy Farms has no effect on the direction of Alternative Investment i.e., Alternative Investment and Australian Dairy go up and down completely randomly.
Pair Corralation between Alternative Investment and Australian Dairy
Assuming the 90 days trading horizon Alternative Investment Trust is expected to generate 0.35 times more return on investment than Australian Dairy. However, Alternative Investment Trust is 2.9 times less risky than Australian Dairy. It trades about 0.13 of its potential returns per unit of risk. Australian Dairy Farms is currently generating about -0.04 per unit of risk. If you would invest 141.00 in Alternative Investment Trust on November 9, 2024 and sell it today you would earn a total of 6.00 from holding Alternative Investment Trust or generate 4.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alternative Investment Trust vs. Australian Dairy Farms
Performance |
Timeline |
Alternative Investment |
Australian Dairy Farms |
Alternative Investment and Australian Dairy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alternative Investment and Australian Dairy
The main advantage of trading using opposite Alternative Investment and Australian Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Investment position performs unexpectedly, Australian Dairy 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 Australian Dairy will offset losses from the drop in Australian Dairy's long position.Alternative Investment vs. Spirit Telecom | Alternative Investment vs. Pearl Gull Iron | Alternative Investment vs. Aeris Environmental | Alternative Investment vs. Insurance Australia Group |
Australian Dairy vs. Viva Leisure | Australian Dairy vs. Centrex Metals | Australian Dairy vs. Sky Metals | Australian Dairy vs. Qbe Insurance Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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