Correlation Between AUST AGRICULTURAL and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL and AIR PRODCHEMICALS 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 AUST AGRICULTURAL and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUST AGRICULTURAL and AIR PRODCHEMICALS, you can compare the effects of market volatilities on AUST AGRICULTURAL and AIR PRODCHEMICALS 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 AUST AGRICULTURAL with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and AIR PRODCHEMICALS.
Diversification Opportunities for AUST AGRICULTURAL and AIR PRODCHEMICALS
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AUST and AIR is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and AUST 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 AUST AGRICULTURAL are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between AUST AGRICULTURAL and AIR PRODCHEMICALS
Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the AIR PRODCHEMICALS. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 1.04 times less risky than AIR PRODCHEMICALS. The stock trades about -0.04 of its potential returns per unit of risk. The AIR PRODCHEMICALS is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 29,520 in AIR PRODCHEMICALS on August 30, 2024 and sell it today you would earn a total of 2,350 from holding AIR PRODCHEMICALS or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUST AGRICULTURAL vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| AUST AGRICULTURAL |
| AIR PRODCHEMICALS |
AUST AGRICULTURAL and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUST AGRICULTURAL and AIR PRODCHEMICALS
The main advantage of trading using opposite AUST AGRICULTURAL and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| AUST AGRICULTURAL vs. RYU Apparel | AUST AGRICULTURAL vs. PLAYTIKA HOLDING DL 01 | AUST AGRICULTURAL vs. Columbia Sportswear | AUST AGRICULTURAL vs. Lifeway Foods |
| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Superior Plus Corp | AIR PRODCHEMICALS vs. SIVERS SEMICONDUCTORS AB |
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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