Correlation Between Australian Unity and ACDC Metals
Can any of the company-specific risk be diversified away by investing in both Australian Unity and ACDC Metals 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 Unity and ACDC Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Unity Office and ACDC Metals, you can compare the effects of market volatilities on Australian Unity and ACDC Metals 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 Unity with a short position of ACDC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and ACDC Metals.
Diversification Opportunities for Australian Unity and ACDC Metals
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and ACDC is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals and Australian Unity 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 Unity Office are associated (or correlated) with ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Australian Unity i.e., Australian Unity and ACDC Metals go up and down completely randomly.
Pair Corralation between Australian Unity and ACDC Metals
Assuming the 90 days trading horizon Australian Unity Office is expected to generate 0.46 times more return on investment than ACDC Metals. However, Australian Unity Office is 2.15 times less risky than ACDC Metals. It trades about -0.02 of its potential returns per unit of risk. ACDC Metals is currently generating about -0.03 per unit of risk. If you would invest 140.00 in Australian Unity Office on August 27, 2024 and sell it today you would lose (34.00) from holding Australian Unity Office or give up 24.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. ACDC Metals
Performance |
| Timeline |
| Australian Unity Office |
| ACDC Metals |
Australian Unity and ACDC Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and ACDC Metals
The main advantage of trading using opposite Australian Unity and ACDC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, ACDC Metals 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 ACDC Metals will offset losses from the drop in ACDC Metals' long position.| Australian Unity vs. Scentre Group | Australian Unity vs. Vicinity Centres Re | Australian Unity vs. Charter Hall Retail | Australian Unity vs. Cromwell Property Group |
| ACDC Metals vs. Northern Star Resources | ACDC Metals vs. Evolution Mining | ACDC Metals vs. Bluescope Steel | ACDC Metals vs. Sandfire Resources NL |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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