Correlation Between Australian Agricultural and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Eagle Materials 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 Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Eagle Materials, you can compare the effects of market volatilities on Australian Agricultural and Eagle Materials 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 Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Eagle Materials.
Diversification Opportunities for Australian Agricultural and Eagle Materials
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Eagle is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials 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 Eagle Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Materials has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Eagle Materials go up and down completely randomly.
Pair Corralation between Australian Agricultural and Eagle Materials
Assuming the 90 days horizon Australian Agricultural is expected to generate 1.41 times more return on investment than Eagle Materials. However, Australian Agricultural is 1.41 times more volatile than Eagle Materials. It trades about -0.02 of its potential returns per unit of risk. Eagle Materials is currently generating about -0.33 per unit of risk. If you would invest 84.00 in Australian Agricultural on September 13, 2024 and sell it today you would lose (1.00) from holding Australian Agricultural or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Eagle Materials
Performance |
| Timeline |
| Australian Agricultural |
| Eagle Materials |
Australian Agricultural and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Eagle Materials
The main advantage of trading using opposite Australian Agricultural and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Eagle Materials 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 Eagle Materials will offset losses from the drop in Eagle Materials' long position.| Australian Agricultural vs. Collins Foods Limited | Australian Agricultural vs. Harmony Gold Mining | Australian Agricultural vs. MCEWEN MINING INC | Australian Agricultural vs. Astral Foods Limited |
| Eagle Materials vs. Heidelberg Materials AG | Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. SIVERS SEMICONDUCTORS AB |
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 Stocks Directory module to find actively traded stocks across global markets.
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