Correlation Between Australian Agricultural and VULCAN MATERIALS
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and VULCAN MATERIALS 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 VULCAN MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and VULCAN MATERIALS, you can compare the effects of market volatilities on Australian Agricultural and VULCAN MATERIALS 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 VULCAN MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and VULCAN MATERIALS.
Diversification Opportunities for Australian Agricultural and VULCAN MATERIALS
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and VULCAN is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and VULCAN MATERIALS go up and down completely randomly.
Pair Corralation between Australian Agricultural and VULCAN MATERIALS
Assuming the 90 days horizon Australian Agricultural is expected to generate 1.26 times more return on investment than VULCAN MATERIALS. However, Australian Agricultural is 1.26 times more volatile than VULCAN MATERIALS. It trades about -0.03 of its potential returns per unit of risk. VULCAN MATERIALS is currently generating about -0.04 per unit of risk. If you would invest 84.00 in Australian Agricultural on November 6, 2024 and sell it today you would lose (3.00) from holding Australian Agricultural or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. VULCAN MATERIALS
Performance |
| Timeline |
| Australian Agricultural |
| VULCAN MATERIALS |
Australian Agricultural and VULCAN MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and VULCAN MATERIALS
The main advantage of trading using opposite Australian Agricultural and VULCAN MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, VULCAN MATERIALS 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 VULCAN MATERIALS will offset losses from the drop in VULCAN MATERIALS's long position.| Australian Agricultural vs. US Physical Therapy | Australian Agricultural vs. Molina Healthcare | Australian Agricultural vs. Treasury Wine Estates | Australian Agricultural vs. Marie Brizard Wine |
| VULCAN MATERIALS vs. PATTIES FOODS | VULCAN MATERIALS vs. Moneysupermarket Group PLC | VULCAN MATERIALS vs. Universal Display | VULCAN MATERIALS vs. United Natural Foods |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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