Correlation Between Australia United and Retail Food
Can any of the company-specific risk be diversified away by investing in both Australia United and Retail Food 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 Australia United and Retail Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australia United Mining and Retail Food Group, you can compare the effects of market volatilities on Australia United and Retail Food 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 Australia United with a short position of Retail Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australia United and Retail Food.
Diversification Opportunities for Australia United and Retail Food
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australia and Retail is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Australia United Mining and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group and Australia United 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 Australia United Mining are associated (or correlated) with Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of Australia United i.e., Australia United and Retail Food go up and down completely randomly.
Pair Corralation between Australia United and Retail Food
Assuming the 90 days trading horizon Australia United Mining is expected to generate 4.04 times more return on investment than Retail Food. However, Australia United is 4.04 times more volatile than Retail Food Group. It trades about 0.04 of its potential returns per unit of risk. Retail Food Group is currently generating about 0.0 per unit of risk. If you would invest 0.20 in Australia United Mining on September 13, 2024 and sell it today you would earn a total of 0.00 from holding Australia United Mining or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australia United Mining vs. Retail Food Group
Performance |
| Timeline |
| Australia United Mining |
| Retail Food Group |
Australia United and Retail Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australia United and Retail Food
The main advantage of trading using opposite Australia United and Retail Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australia United position performs unexpectedly, Retail Food 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 Retail Food will offset losses from the drop in Retail Food's long position.The idea behind Australia United Mining and Retail Food Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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