Correlation Between Australian Agricultural and FedEx
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and FedEx 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 FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and FedEx, you can compare the effects of market volatilities on Australian Agricultural and FedEx 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 FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and FedEx.
Diversification Opportunities for Australian Agricultural and FedEx
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and FedEx is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and FedEx go up and down completely randomly.
Pair Corralation between Australian Agricultural and FedEx
Assuming the 90 days horizon Australian Agricultural is expected to generate 1.79 times less return on investment than FedEx. But when comparing it to its historical volatility, Australian Agricultural is 1.01 times less risky than FedEx. It trades about 0.02 of its potential returns per unit of risk. FedEx is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 23,356 in FedEx on August 30, 2024 and sell it today you would earn a total of 5,429 from holding FedEx or generate 23.24% 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. FedEx
Performance |
| Timeline |
| Australian Agricultural |
| FedEx |
Australian Agricultural and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and FedEx
The main advantage of trading using opposite Australian Agricultural and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.| Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. SalMar ASA | Australian Agricultural vs. Superior Plus Corp | Australian Agricultural vs. SIVERS SEMICONDUCTORS AB |
| FedEx vs. DICKS Sporting Goods | FedEx vs. SPORTING | FedEx vs. Ming Le Sports | FedEx vs. Air Transport Services |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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