Correlation Between Australian Unity and Pacific Current
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Pacific Current 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 Pacific Current 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 Pacific Current Group, you can compare the effects of market volatilities on Australian Unity and Pacific Current 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 Pacific Current. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Pacific Current.
Diversification Opportunities for Australian Unity and Pacific Current
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and Pacific is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Pacific Current Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Current Group 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 Pacific Current. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Current Group has no effect on the direction of Australian Unity i.e., Australian Unity and Pacific Current go up and down completely randomly.
Pair Corralation between Australian Unity and Pacific Current
Assuming the 90 days trading horizon Australian Unity is expected to generate 1.43 times less return on investment than Pacific Current. In addition to that, Australian Unity is 1.5 times more volatile than Pacific Current Group. It trades about 0.02 of its total potential returns per unit of risk. Pacific Current Group is currently generating about 0.05 per unit of volatility. If you would invest 1,000.00 in Pacific Current Group on September 3, 2024 and sell it today you would earn a total of 84.00 from holding Pacific Current Group or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. Pacific Current Group
Performance |
| Timeline |
| Australian Unity Office |
| Pacific Current Group |
Australian Unity and Pacific Current Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Pacific Current
The main advantage of trading using opposite Australian Unity and Pacific Current positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Pacific Current 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 Pacific Current will offset losses from the drop in Pacific Current's long position.| Australian Unity vs. GDI Property Group | Australian Unity vs. Champion Iron | Australian Unity vs. iShares Global Healthcare | Australian Unity vs. Peel Mining |
| Pacific Current vs. Ainsworth Game Technology | Pacific Current vs. Medical Developments International | Pacific Current vs. oOhMedia | Pacific Current vs. Seven West Media |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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