Correlation Between Australian Unity and Seven West
Can any of the company-specific risk be diversified away by investing in both Australian Unity and Seven West 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 Seven West 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 Seven West Media, you can compare the effects of market volatilities on Australian Unity and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Seven West.
Diversification Opportunities for Australian Unity and Seven West
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Seven is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Australian Unity i.e., Australian Unity and Seven West go up and down completely randomly.
Pair Corralation between Australian Unity and Seven West
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Seven West. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 3.45 times less risky than Seven West. The stock trades about -0.24 of its potential returns per unit of risk. The Seven West Media is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Seven West Media on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Seven West Media or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. Seven West Media
Performance |
| Timeline |
| Australian Unity Office |
| Seven West Media |
Australian Unity and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Seven West
The main advantage of trading using opposite Australian Unity and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West's long position.| Australian Unity vs. Champion Iron | Australian Unity vs. Ridley | Australian Unity vs. Peel Mining | Australian Unity vs. Australian Dairy Farms |
| Seven West vs. PVW Resources | Seven West vs. Woolworths | Seven West vs. Wesfarmers | Seven West vs. Coles Group |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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