Correlation Between Australian United and Premier Investments
Can any of the company-specific risk be diversified away by investing in both Australian United and Premier Investments 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 Premier Investments 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 Premier Investments, you can compare the effects of market volatilities on Australian United and Premier Investments 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 Premier Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Premier Investments.
Diversification Opportunities for Australian United and Premier Investments
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and Premier is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Premier Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Investments 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 Premier Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Investments has no effect on the direction of Australian United i.e., Australian United and Premier Investments go up and down completely randomly.
Pair Corralation between Australian United and Premier Investments
Assuming the 90 days trading horizon Australian United is expected to generate 3.42 times less return on investment than Premier Investments. But when comparing it to its historical volatility, Australian United Investment is 2.48 times less risky than Premier Investments. It trades about 0.05 of its potential returns per unit of risk. Premier Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,580 in Premier Investments on September 14, 2024 and sell it today you would earn a total of 837.00 from holding Premier Investments or generate 32.44% 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. Premier Investments
Performance |
| Timeline |
| Australian United |
| Premier Investments |
Australian United and Premier Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Premier Investments
The main advantage of trading using opposite Australian United and Premier Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Premier Investments 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 Premier Investments will offset losses from the drop in Premier Investments' long position.| Australian United vs. Stelar Metals | Australian United vs. Carnegie Clean Energy | Australian United vs. Sky Metals | Australian United vs. Air New Zealand |
| Premier Investments vs. Hutchison Telecommunications | Premier Investments vs. Energy Resources | Premier Investments vs. GO2 People | Premier Investments vs. Pact Group Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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