Correlation Between Australian United and Australian Bond
Can any of the company-specific risk be diversified away by investing in both Australian United and Australian Bond 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 United and Australian Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian United Investment and Australian Bond Exchange, you can compare the effects of market volatilities on Australian United and Australian Bond 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 United with a short position of Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Australian Bond.
Diversification Opportunities for Australian United and Australian Bond
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and Australian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange and Australian United 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 United Investment are associated (or correlated) with Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of Australian United i.e., Australian United and Australian Bond go up and down completely randomly.
Pair Corralation between Australian United and Australian Bond
Assuming the 90 days trading horizon Australian United is expected to generate 13.43 times less return on investment than Australian Bond. But when comparing it to its historical volatility, Australian United Investment is 9.48 times less risky than Australian Bond. It trades about 0.04 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Australian Bond Exchange on September 3, 2024 and sell it today you would earn a total of 0.70 from holding Australian Bond Exchange or generate 28.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Australian Bond Exchange
Performance |
| Timeline |
| Australian United |
| Australian Bond Exchange |
Australian United and Australian Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Australian Bond
The main advantage of trading using opposite Australian United and Australian Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Australian Bond 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 Bond will offset losses from the drop in Australian Bond's long position.The idea behind Australian United Investment and Australian Bond Exchange pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Australian Bond vs. Australian United Investment | Australian Bond vs. Neurotech International | Australian Bond vs. Ras Technology Holdings | Australian Bond vs. WiseTech Global Limited |
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 CEOs Directory module to screen CEOs from public companies around the world.
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