Correlation Between Australian Agricultural and BANK OF CHINA
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and BANK OF CHINA 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 BANK OF CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and BANK OF CHINA, you can compare the effects of market volatilities on Australian Agricultural and BANK OF CHINA 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 BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and BANK OF CHINA.
Diversification Opportunities for Australian Agricultural and BANK OF CHINA
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and BANK is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA 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 BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and BANK OF CHINA go up and down completely randomly.
Pair Corralation between Australian Agricultural and BANK OF CHINA
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the BANK OF CHINA. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 5.03 times less risky than BANK OF CHINA. The stock trades about -0.03 of its potential returns per unit of risk. The BANK OF CHINA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 36.00 in BANK OF CHINA on November 7, 2024 and sell it today you would earn a total of 14.00 from holding BANK OF CHINA or generate 38.89% 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. BANK OF CHINA
Performance |
| Timeline |
| Australian Agricultural |
| BANK OF CHINA |
Australian Agricultural and BANK OF CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and BANK OF CHINA
The main advantage of trading using opposite Australian Agricultural and BANK OF CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, BANK OF CHINA 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 BANK OF CHINA will offset losses from the drop in BANK OF CHINA'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 |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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