Correlation Between Australian Agricultural and BRIT AMER
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and BRIT AMER 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 BRIT AMER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and BRIT AMER TOBACCO, you can compare the effects of market volatilities on Australian Agricultural and BRIT AMER 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 BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and BRIT AMER.
Diversification Opportunities for Australian Agricultural and BRIT AMER
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and BRIT is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and BRIT AMER go up and down completely randomly.
Pair Corralation between Australian Agricultural and BRIT AMER
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the BRIT AMER. In addition to that, Australian Agricultural is 1.75 times more volatile than BRIT AMER TOBACCO. It trades about -0.02 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.02 per unit of volatility. If you would invest 3,249 in BRIT AMER TOBACCO on September 23, 2024 and sell it today you would earn a total of 233.00 from holding BRIT AMER TOBACCO or generate 7.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. BRIT AMER TOBACCO
Performance |
| Timeline |
| Australian Agricultural |
| BRIT AMER TOBACCO |
Australian Agricultural and BRIT AMER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and BRIT AMER
The main advantage of trading using opposite Australian Agricultural and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.| Australian Agricultural vs. Archer Daniels Midland | Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. Wilmar International Limited | Australian Agricultural vs. MOWI ASA SPADR |
| BRIT AMER vs. CARSALESCOM | BRIT AMER vs. The Trade Desk | BRIT AMER vs. FAST RETAIL ADR | BRIT AMER vs. Tradeweb Markets |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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