Correlation Between Australian United and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both Australian United and Stelar Metals 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 Stelar Metals 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 Stelar Metals, you can compare the effects of market volatilities on Australian United and Stelar Metals 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 Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Stelar Metals.
Diversification Opportunities for Australian United and Stelar Metals
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Stelar is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals 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 Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Australian United i.e., Australian United and Stelar Metals go up and down completely randomly.
Pair Corralation between Australian United and Stelar Metals
Assuming the 90 days trading horizon Australian United is expected to generate 1.28 times less return on investment than Stelar Metals. But when comparing it to its historical volatility, Australian United Investment is 5.76 times less risky than Stelar Metals. It trades about 0.05 of its potential returns per unit of risk. Stelar Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Stelar Metals on August 29, 2024 and sell it today you would lose (0.50) from holding Stelar Metals or give up 7.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Stelar Metals
Performance |
| Timeline |
| Australian United |
| Stelar Metals |
Australian United and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Stelar Metals
The main advantage of trading using opposite Australian United and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Stelar Metals 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 Stelar Metals will offset losses from the drop in Stelar Metals' long position.| Australian United vs. Global Health | Australian United vs. Toys R Us | Australian United vs. Tombador Iron | Australian United vs. Aussie Broadband |
| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Sandfire Resources NL |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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