Correlation Between AIR PRODCHEMICALS and AUST AGRICULTURAL
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and AUST 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 AUST 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 AUST AGRICULTURAL, you can compare the effects of market volatilities on AIR PRODCHEMICALS and AUST 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 AUST AGRICULTURAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and AUST AGRICULTURAL.
Diversification Opportunities for AIR PRODCHEMICALS and AUST AGRICULTURAL
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between AIR and AUST is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST 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 AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and AUST AGRICULTURAL go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and AUST AGRICULTURAL
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.07 times more return on investment than AUST AGRICULTURAL. However, AIR PRODCHEMICALS is 1.07 times more volatile than AUST AGRICULTURAL. It trades about 0.44 of its potential returns per unit of risk. AUST AGRICULTURAL is currently generating about 0.12 per unit of risk. If you would invest 28,640 in AIR PRODCHEMICALS on September 2, 2024 and sell it today you would earn a total of 2,990 from holding AIR PRODCHEMICALS or generate 10.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. AUST AGRICULTURAL
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| AUST AGRICULTURAL |
AIR PRODCHEMICALS and AUST AGRICULTURAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and AUST AGRICULTURAL
The main advantage of trading using opposite AIR PRODCHEMICALS and AUST AGRICULTURAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, AUST 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 AUST AGRICULTURAL will offset losses from the drop in AUST AGRICULTURAL's long position.| AIR PRODCHEMICALS vs. SIVERS SEMICONDUCTORS AB | AIR PRODCHEMICALS vs. Darden Restaurants | AIR PRODCHEMICALS vs. Reliance Steel Aluminum | AIR PRODCHEMICALS vs. Q2M Managementberatung AG |
| AUST AGRICULTURAL vs. SIVERS SEMICONDUCTORS AB | AUST AGRICULTURAL vs. Darden Restaurants | AUST AGRICULTURAL vs. Reliance Steel Aluminum | AUST AGRICULTURAL vs. Q2M Managementberatung AG |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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