Correlation Between Australian Unity and Patriot Battery
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Patriot Battery 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 Patriot Battery 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 Patriot Battery Metals, you can compare the effects of market volatilities on Australian Unity and Patriot Battery 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 Patriot Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Patriot Battery.
Diversification Opportunities for Australian Unity and Patriot Battery
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Patriot is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Australian Unity i.e., Australian Unity and Patriot Battery go up and down completely randomly.
Pair Corralation between Australian Unity and Patriot Battery
Assuming the 90 days trading horizon Australian Unity Office is expected to generate 0.35 times more return on investment than Patriot Battery. However, Australian Unity Office is 2.88 times less risky than Patriot Battery. It trades about -0.02 of its potential returns per unit of risk. Patriot Battery 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 Together |
| Strength | Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Australian Unity Office vs. Patriot Battery Metals
Performance |
| Timeline |
| Australian Unity Office |
| Patriot Battery Metals |
Australian Unity and Patriot Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Patriot Battery
The main advantage of trading using opposite Australian Unity and Patriot Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Patriot Battery 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 Patriot Battery will offset losses from the drop in Patriot Battery's 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 |
| Patriot Battery vs. Northern Star Resources | Patriot Battery vs. Evolution Mining | Patriot Battery vs. Bluescope Steel | Patriot Battery 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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