Correlation Between Australian United and Regal Investment
Can any of the company-specific risk be diversified away by investing in both Australian United and Regal Investment 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 Regal Investment 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 Regal Investment, you can compare the effects of market volatilities on Australian United and Regal Investment 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 Regal Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Regal Investment.
Diversification Opportunities for Australian United and Regal Investment
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Regal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Regal Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Investment 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 Regal Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Investment has no effect on the direction of Australian United i.e., Australian United and Regal Investment go up and down completely randomly.
Pair Corralation between Australian United and Regal Investment
Assuming the 90 days trading horizon Australian United is expected to generate 5.86 times less return on investment than Regal Investment. But when comparing it to its historical volatility, Australian United Investment is 1.37 times less risky than Regal Investment. It trades about 0.03 of its potential returns per unit of risk. Regal Investment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 319.00 in Regal Investment on August 29, 2024 and sell it today you would earn a total of 33.00 from holding Regal Investment or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Regal Investment
Performance |
| Timeline |
| Australian United |
| Regal Investment |
Australian United and Regal Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Regal Investment
The main advantage of trading using opposite Australian United and Regal Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Regal Investment 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 Regal Investment will offset losses from the drop in Regal Investment's long position.| Australian United vs. Global Health | Australian United vs. Toys R Us | Australian United vs. Tombador Iron | Australian United vs. Aussie Broadband |
| Regal Investment vs. Embark Education Group | Regal Investment vs. Pinnacle Investment Management | Regal Investment vs. Stelar Metals | Regal Investment vs. Nova Eye Medical |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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