Correlation Between Australian Unity and Brickworks
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Brickworks 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 Brickworks 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 Brickworks, you can compare the effects of market volatilities on Australian Unity and Brickworks 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 Brickworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Brickworks.
Diversification Opportunities for Australian Unity and Brickworks
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Australian and Brickworks is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Brickworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickworks 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 Brickworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickworks has no effect on the direction of Australian Unity i.e., Australian Unity and Brickworks go up and down completely randomly.
Pair Corralation between Australian Unity and Brickworks
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Brickworks. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 1.38 times less risky than Brickworks. The stock trades about -0.11 of its potential returns per unit of risk. The Brickworks is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,605 in Brickworks on September 3, 2024 and sell it today you would earn a total of 21.00 from holding Brickworks or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. Brickworks
Performance |
| Timeline |
| Australian Unity Office |
| Brickworks |
Australian Unity and Brickworks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Brickworks
The main advantage of trading using opposite Australian Unity and Brickworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Brickworks 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 Brickworks will offset losses from the drop in Brickworks' long position.| Australian Unity vs. Charter Hall Retail | Australian Unity vs. GDI Property Group | Australian Unity vs. Champion Iron | Australian Unity vs. iShares Global Healthcare |
| Brickworks vs. Ainsworth Game Technology | Brickworks vs. Advanced Braking Technology | Brickworks vs. Queste Communications | Brickworks vs. Australian Unity Office |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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