Correlation Between Australian Agricultural and INTER CARS
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and INTER CARS 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 Agricultural and INTER CARS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and INTER CARS SA, you can compare the effects of market volatilities on Australian Agricultural and INTER CARS 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 Agricultural with a short position of INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and INTER CARS.
Diversification Opportunities for Australian Agricultural and INTER CARS
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and INTER is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA and Australian Agricultural 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 Agricultural are associated (or correlated) with INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and INTER CARS go up and down completely randomly.
Pair Corralation between Australian Agricultural and INTER CARS
Assuming the 90 days horizon Australian Agricultural is expected to generate 0.93 times more return on investment than INTER CARS. However, Australian Agricultural is 1.08 times less risky than INTER CARS. It trades about 0.01 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.03 per unit of risk. If you would invest 84.00 in Australian Agricultural on September 4, 2024 and sell it today you would earn a total of 0.00 from holding Australian Agricultural or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. INTER CARS SA
Performance |
| Timeline |
| Australian Agricultural |
| INTER CARS SA |
Australian Agricultural and INTER CARS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and INTER CARS
The main advantage of trading using opposite Australian Agricultural and INTER CARS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, INTER CARS 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 INTER CARS will offset losses from the drop in INTER CARS's long position.| Australian Agricultural vs. Archer Daniels Midland | Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. Wilmar International Limited | Australian Agricultural vs. SalMar ASA |
| INTER CARS vs. PT Astra International | INTER CARS vs. Superior Plus Corp | INTER CARS vs. NMI Holdings | INTER CARS vs. Origin Agritech |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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