Correlation Between Australian United and Capitol Health
Can any of the company-specific risk be diversified away by investing in both Australian United and Capitol Health 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 Capitol Health 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 Capitol Health, you can compare the effects of market volatilities on Australian United and Capitol Health 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 Capitol Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Capitol Health.
Diversification Opportunities for Australian United and Capitol Health
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Australian and Capitol is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Capitol Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Health 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 Capitol Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Health has no effect on the direction of Australian United i.e., Australian United and Capitol Health go up and down completely randomly.
Pair Corralation between Australian United and Capitol Health
Assuming the 90 days trading horizon Australian United is expected to generate 2.66 times less return on investment than Capitol Health. But when comparing it to its historical volatility, Australian United Investment is 3.91 times less risky than Capitol Health. It trades about 0.05 of its potential returns per unit of risk. Capitol Health is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Capitol Health on September 20, 2024 and sell it today you would earn a total of 9.00 from holding Capitol Health or generate 30.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Capitol Health
Performance |
| Timeline |
| Australian United |
| Capitol Health |
Australian United and Capitol Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Capitol Health
The main advantage of trading using opposite Australian United and Capitol Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Capitol Health 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 Capitol Health will offset losses from the drop in Capitol Health's long position.| Australian United vs. Australian Foundation Investment | Australian United vs. Metrics Master Income | Australian United vs. L1 Long Short | Australian United vs. Wam Leaders |
| Capitol Health vs. BKI Investment | Capitol Health vs. Australian United Investment | Capitol Health vs. Clime Investment Management | Capitol Health vs. Spirit Telecom |
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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