Correlation Between Australian United and Ironbark Capital
Can any of the company-specific risk be diversified away by investing in both Australian United and Ironbark Capital 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 Ironbark Capital 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 Ironbark Capital, you can compare the effects of market volatilities on Australian United and Ironbark Capital 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 Ironbark Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Ironbark Capital.
Diversification Opportunities for Australian United and Ironbark Capital
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Ironbark is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Ironbark Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironbark Capital 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 Ironbark Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironbark Capital has no effect on the direction of Australian United i.e., Australian United and Ironbark Capital go up and down completely randomly.
Pair Corralation between Australian United and Ironbark Capital
Assuming the 90 days trading horizon Australian United Investment is expected to generate 0.66 times more return on investment than Ironbark Capital. However, Australian United Investment is 1.52 times less risky than Ironbark Capital. It trades about 0.04 of its potential returns per unit of risk. Ironbark Capital is currently generating about 0.02 per unit of risk. If you would invest 1,019 in Australian United Investment on September 3, 2024 and sell it today you would earn a total of 49.00 from holding Australian United Investment or generate 4.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Ironbark Capital
Performance |
| Timeline |
| Australian United |
| Ironbark Capital |
Australian United and Ironbark Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Ironbark Capital
The main advantage of trading using opposite Australian United and Ironbark Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Ironbark Capital 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 Ironbark Capital will offset losses from the drop in Ironbark Capital's long position.The idea behind Australian United Investment and Ironbark Capital 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.| Ironbark Capital vs. GQG Partners DRC | Ironbark Capital vs. BKI Investment | Ironbark Capital vs. Australian United Investment |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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