Correlation Between Brickworks and Aurelia Metals
Can any of the company-specific risk be diversified away by investing in both Brickworks and Aurelia Metals 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 Brickworks and Aurelia Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brickworks and Aurelia Metals, you can compare the effects of market volatilities on Brickworks and Aurelia Metals 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 Brickworks with a short position of Aurelia Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brickworks and Aurelia Metals.
Diversification Opportunities for Brickworks and Aurelia Metals
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brickworks and Aurelia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Brickworks and Aurelia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and Brickworks 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 Brickworks are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Brickworks i.e., Brickworks and Aurelia Metals go up and down completely randomly.
Pair Corralation between Brickworks and Aurelia Metals
Assuming the 90 days trading horizon Brickworks is expected to generate 0.29 times more return on investment than Aurelia Metals. However, Brickworks is 3.49 times less risky than Aurelia Metals. It trades about -0.06 of its potential returns per unit of risk. Aurelia Metals is currently generating about -0.11 per unit of risk. If you would invest 2,671 in Brickworks on September 1, 2024 and sell it today you would lose (45.00) from holding Brickworks or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brickworks vs. Aurelia Metals
Performance |
| Timeline |
| Brickworks |
| Aurelia Metals |
Brickworks and Aurelia Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brickworks and Aurelia Metals
The main advantage of trading using opposite Brickworks and Aurelia Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brickworks position performs unexpectedly, Aurelia Metals 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 Aurelia Metals will offset losses from the drop in Aurelia Metals' long position.| Brickworks vs. Treasury Wine Estates | Brickworks vs. Aurelia Metals | Brickworks vs. Sky Metals | Brickworks vs. My Foodie Box |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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