Correlation Between Australian Unity and Energy Resources
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Energy Resources 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 Energy Resources 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 Energy Resources, you can compare the effects of market volatilities on Australian Unity and Energy Resources 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 Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Energy Resources.
Diversification Opportunities for Australian Unity and Energy Resources
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Energy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources 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 Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of Australian Unity i.e., Australian Unity and Energy Resources go up and down completely randomly.
Pair Corralation between Australian Unity and Energy Resources
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Energy Resources. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 30.37 times less risky than Energy Resources. The stock trades about -0.08 of its potential returns per unit of risk. The Energy Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.30 in Energy Resources on September 25, 2024 and sell it today you would lose (0.10) from holding Energy Resources or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. Energy Resources
Performance |
| Timeline |
| Australian Unity Office |
| Energy Resources |
Australian Unity and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Energy Resources
The main advantage of trading using opposite Australian Unity and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Energy Resources 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 Energy Resources will offset losses from the drop in Energy Resources' long position.| Australian Unity vs. Scentre Group | Australian Unity vs. Vicinity Centres Re | Australian Unity vs. Charter Hall Retail | Australian Unity vs. Carindale Property Trust |
| Energy Resources vs. Australian Unity Office | Energy Resources vs. Autosports Group | Energy Resources vs. Step One Clothing | Energy Resources vs. Insignia Financial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |