Correlation Between Australian Agricultural and Consolidated Communications
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Consolidated Communications 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 Consolidated Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Consolidated Communications Holdings, you can compare the effects of market volatilities on Australian Agricultural and Consolidated Communications 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 Consolidated Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Consolidated Communications.
Diversification Opportunities for Australian Agricultural and Consolidated Communications
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Australian and Consolidated is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Consolidated Communications go up and down completely randomly.
Pair Corralation between Australian Agricultural and Consolidated Communications
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the Consolidated Communications. In addition to that, Australian Agricultural is 1.88 times more volatile than Consolidated Communications Holdings. It trades about -0.03 of its total potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.09 per unit of volatility. If you would invest 400.00 in Consolidated Communications Holdings on September 3, 2024 and sell it today you would earn a total of 42.00 from holding Consolidated Communications Holdings or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Consolidated Communications Ho
Performance |
| Timeline |
| Australian Agricultural |
| Consolidated Communications |
Australian Agricultural and Consolidated Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Consolidated Communications
The main advantage of trading using opposite Australian Agricultural and Consolidated Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Consolidated Communications 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 Consolidated Communications will offset losses from the drop in Consolidated Communications' long position.| Australian Agricultural vs. Archer Daniels Midland | Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. Wilmar International Limited | Australian Agricultural vs. SalMar ASA |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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