Correlation Between Australian Unity and Resource Base
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Resource Base 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 Resource Base 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 Resource Base, you can compare the effects of market volatilities on Australian Unity and Resource Base 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 Resource Base. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Resource Base.
Diversification Opportunities for Australian Unity and Resource Base
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Resource is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base 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 Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Australian Unity i.e., Australian Unity and Resource Base go up and down completely randomly.
Pair Corralation between Australian Unity and Resource Base
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Resource Base. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 2.48 times less risky than Resource Base. The stock trades about -0.23 of its potential returns per unit of risk. The Resource Base is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Resource Base on August 30, 2024 and sell it today you would earn a total of 0.70 from holding Resource Base or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Australian Unity Office vs. Resource Base
Performance |
| Timeline |
| Australian Unity Office |
| Resource Base |
Australian Unity and Resource Base Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Resource Base
The main advantage of trading using opposite Australian Unity and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.| Australian Unity vs. Charter Hall Retail | Australian Unity vs. Ecofibre | Australian Unity vs. iShares Global Healthcare | Australian Unity vs. Adriatic Metals Plc |
| Resource Base vs. ARN Media Limited | Resource Base vs. Australian Agricultural | Resource Base vs. Red Hill Iron | Resource Base 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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