Correlation Between Australian Agricultural and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and GOODYEAR T 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 GOODYEAR T into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and GOODYEAR T RUBBER, you can compare the effects of market volatilities on Australian Agricultural and GOODYEAR T 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 GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and GOODYEAR T.
Diversification Opportunities for Australian Agricultural and GOODYEAR T
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Australian and GOODYEAR is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and GOODYEAR T go up and down completely randomly.
Pair Corralation between Australian Agricultural and GOODYEAR T
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the GOODYEAR T. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 1.47 times less risky than GOODYEAR T. The stock trades about -0.03 of its potential returns per unit of risk. The GOODYEAR T RUBBER is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 841.00 in GOODYEAR T RUBBER on November 7, 2024 and sell it today you would earn a total of 20.00 from holding GOODYEAR T RUBBER or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Australian Agricultural vs. GOODYEAR T RUBBER
Performance |
| Timeline |
| Australian Agricultural |
| GOODYEAR T RUBBER |
Australian Agricultural and GOODYEAR T Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and GOODYEAR T
The main advantage of trading using opposite Australian Agricultural and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.| Australian Agricultural vs. AEON STORES | Australian Agricultural vs. GREENX METALS LTD | Australian Agricultural vs. MARKET VECTR RETAIL | Australian Agricultural vs. Cleanaway Waste Management |
| GOODYEAR T vs. CARDINAL HEALTH | GOODYEAR T vs. Cardinal Health | GOODYEAR T vs. OPKO HEALTH | GOODYEAR T vs. Sims Metal Management |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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