Correlation Between Australian Agricultural and INSURANCE AUST
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and INSURANCE AUST 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 INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and INSURANCE AUST GRP, you can compare the effects of market volatilities on Australian Agricultural and INSURANCE AUST 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 INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and INSURANCE AUST.
Diversification Opportunities for Australian Agricultural and INSURANCE AUST
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and INSURANCE is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and INSURANCE AUST go up and down completely randomly.
Pair Corralation between Australian Agricultural and INSURANCE AUST
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the INSURANCE AUST. In addition to that, Australian Agricultural is 1.0 times more volatile than INSURANCE AUST GRP. It trades about -0.02 of its total potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.13 per unit of volatility. If you would invest 454.00 in INSURANCE AUST GRP on September 22, 2024 and sell it today you would earn a total of 42.00 from holding INSURANCE AUST GRP or generate 9.25% 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. INSURANCE AUST GRP
Performance |
| Timeline |
| Australian Agricultural |
| INSURANCE AUST GRP |
Australian Agricultural and INSURANCE AUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and INSURANCE AUST
The main advantage of trading using opposite Australian Agricultural and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, INSURANCE AUST 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 INSURANCE AUST will offset losses from the drop in INSURANCE AUST'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 |
| INSURANCE AUST vs. DAIRY FARM INTL | INSURANCE AUST vs. Sterling Construction | INSURANCE AUST vs. Entravision Communications | INSURANCE AUST vs. Australian Agricultural |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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