Correlation Between AUST AGRICULTURAL and Industrial
Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL and Industrial 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 Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUST AGRICULTURAL and Industrial and Commercial, you can compare the effects of market volatilities on AUST AGRICULTURAL and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and Industrial.
Diversification Opportunities for AUST AGRICULTURAL and Industrial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between AUST and Industrial is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Industrial go up and down completely randomly.
Pair Corralation between AUST AGRICULTURAL and Industrial
Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the Industrial. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 1.68 times less risky than Industrial. The stock trades about -0.08 of its potential returns per unit of risk. The Industrial and Commercial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 56.00 in Industrial and Commercial on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Industrial and Commercial or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
AUST AGRICULTURAL vs. Industrial and Commercial
Performance |
| Timeline |
| AUST AGRICULTURAL |
| Industrial and Commercial |
AUST AGRICULTURAL and Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUST AGRICULTURAL and Industrial
The main advantage of trading using opposite AUST AGRICULTURAL and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL position performs unexpectedly, Industrial 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 Industrial will offset losses from the drop in Industrial's long position.| AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc |
| Industrial vs. PT Bank Maybank | Industrial vs. North American Construction | Industrial vs. BANKINTER ADR 2007 | Industrial vs. AUST AGRICULTURAL |
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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