Correlation Between AIR PRODCHEMICALS and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and Australian Agricultural 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 AIR PRODCHEMICALS and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and Australian Agricultural, you can compare the effects of market volatilities on AIR PRODCHEMICALS and Australian Agricultural 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 AIR PRODCHEMICALS with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Australian Agricultural.
Diversification Opportunities for AIR PRODCHEMICALS and Australian Agricultural
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AIR and Australian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Australian Agricultural go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and Australian Agricultural
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.6 times more return on investment than Australian Agricultural. However, AIR PRODCHEMICALS is 1.66 times less risky than Australian Agricultural. It trades about 0.12 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.07 per unit of risk. If you would invest 30,350 in AIR PRODCHEMICALS on August 25, 2024 and sell it today you would earn a total of 1,000.00 from holding AIR PRODCHEMICALS or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. Australian Agricultural
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| Australian Agricultural |
AIR PRODCHEMICALS and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and Australian Agricultural
The main advantage of trading using opposite AIR PRODCHEMICALS and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc |
| Australian Agricultural vs. Charoen Pokphand Foods | Australian Agricultural vs. Superior Plus Corp | Australian Agricultural vs. NMI Holdings | Australian Agricultural vs. Origin Agritech |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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