Correlation Between Australian Agricultural and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Sterling Construction 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 Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Sterling Construction, you can compare the effects of market volatilities on Australian Agricultural and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Sterling Construction.
Diversification Opportunities for Australian Agricultural and Sterling Construction
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and Sterling is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Sterling Construction go up and down completely randomly.
Pair Corralation between Australian Agricultural and Sterling Construction
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 1.54 times less risky than Sterling Construction. The stock trades about -0.01 of its potential returns per unit of risk. The Sterling Construction is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,860 in Sterling Construction on August 27, 2024 and sell it today you would earn a total of 14,895 from holding Sterling Construction or generate 385.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Sterling Construction
Performance |
| Timeline |
| Australian Agricultural |
| Sterling Construction |
Australian Agricultural and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Sterling Construction
The main advantage of trading using opposite Australian Agricultural and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| Australian Agricultural vs. Superior Plus Corp | Australian Agricultural vs. NMI Holdings | Australian Agricultural vs. Origin Agritech | Australian Agricultural vs. SIVERS SEMICONDUCTORS AB |
| Sterling Construction vs. China Railway Group | Sterling Construction vs. China Railway Construction | Sterling Construction vs. AECOM | Sterling Construction vs. Superior Plus Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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