Correlation Between Australian Agricultural and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Pembina Pipeline 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 Pembina Pipeline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Pembina Pipeline Corp, you can compare the effects of market volatilities on Australian Agricultural and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Pembina Pipeline.
Diversification Opportunities for Australian Agricultural and Pembina Pipeline
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Pembina is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Australian Agricultural and Pembina Pipeline
Assuming the 90 days horizon Australian Agricultural is expected to generate 20.0 times less return on investment than Pembina Pipeline. But when comparing it to its historical volatility, Australian Agricultural is 1.22 times less risky than Pembina Pipeline. It trades about 0.0 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,512 in Pembina Pipeline Corp on October 25, 2024 and sell it today you would earn a total of 59.00 from holding Pembina Pipeline Corp or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Pembina Pipeline Corp
Performance |
| Timeline |
| Australian Agricultural |
| Pembina Pipeline Corp |
Australian Agricultural and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Pembina Pipeline
The main advantage of trading using opposite Australian Agricultural and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.| Australian Agricultural vs. Archer Daniels Midland | Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. MOWI ASA SPADR | Australian Agricultural vs. Mowi ASA |
| Pembina Pipeline vs. TC Energy | Pembina Pipeline vs. Cheniere Energy | Pembina Pipeline vs. Kinder Morgan | Pembina Pipeline vs. The Williams Companies |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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