Correlation Between Australian Agricultural and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Ultra Clean 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 Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Ultra Clean Holdings, you can compare the effects of market volatilities on Australian Agricultural and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Ultra Clean.
Diversification Opportunities for Australian Agricultural and Ultra Clean
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and Ultra is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Ultra Clean go up and down completely randomly.
Pair Corralation between Australian Agricultural and Ultra Clean
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the Ultra Clean. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 1.25 times less risky than Ultra Clean. The stock trades about -0.02 of its potential returns per unit of risk. The Ultra Clean Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,160 in Ultra Clean Holdings on September 1, 2024 and sell it today you would earn a total of 340.00 from holding Ultra Clean Holdings or generate 10.76% 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. Ultra Clean Holdings
Performance |
| Timeline |
| Australian Agricultural |
| Ultra Clean Holdings |
Australian Agricultural and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Ultra Clean
The main advantage of trading using opposite Australian Agricultural and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean's long position.| Australian Agricultural vs. SalMar ASA | Australian Agricultural vs. Superior Plus Corp | Australian Agricultural vs. NMI Holdings | Australian Agricultural vs. Origin Agritech |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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