Correlation Between Australian Agricultural and SW Seed
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and SW Seed 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 Agricultural and SW Seed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and SW Seed Company, you can compare the effects of market volatilities on Australian Agricultural and SW Seed 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 Agricultural with a short position of SW Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and SW Seed.
Diversification Opportunities for Australian Agricultural and SW Seed
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Australian and SANW is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company and Australian Agricultural 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 Agricultural are associated (or correlated) with SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and SW Seed go up and down completely randomly.
Pair Corralation between Australian Agricultural and SW Seed
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the SW Seed. But the pink sheet apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 6.7 times less risky than SW Seed. The pink sheet trades about -0.15 of its potential returns per unit of risk. The SW Seed Company is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 707.00 in SW Seed Company on October 26, 2024 and sell it today you would earn a total of 232.00 from holding SW Seed Company or generate 32.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Australian Agricultural vs. SW Seed Company
Performance |
| Timeline |
| Australian Agricultural |
| SW Seed Company |
Australian Agricultural and SW Seed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and SW Seed
The main advantage of trading using opposite Australian Agricultural and SW Seed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, SW Seed 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 SW Seed will offset losses from the drop in SW Seed's long position.| Australian Agricultural vs. GrainCorp Limited | Australian Agricultural vs. Forafric Global PLC | Australian Agricultural vs. Forafric Global PLC | Australian Agricultural vs. Limoneira Co |
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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