Correlation Between Australian Oilseeds and Western Copper
Can any of the company-specific risk be diversified away by investing in both Australian Oilseeds and Western Copper 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 Oilseeds and Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Oilseeds Holdings and Western Copper and, you can compare the effects of market volatilities on Australian Oilseeds and Western Copper 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 Oilseeds with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Oilseeds and Western Copper.
Diversification Opportunities for Australian Oilseeds and Western Copper
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and Western is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Australian Oilseeds Holdings and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and Australian Oilseeds 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 Oilseeds Holdings are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Australian Oilseeds i.e., Australian Oilseeds and Western Copper go up and down completely randomly.
Pair Corralation between Australian Oilseeds and Western Copper
Assuming the 90 days horizon Australian Oilseeds Holdings is expected to generate 10.43 times more return on investment than Western Copper. However, Australian Oilseeds is 10.43 times more volatile than Western Copper and. It trades about 0.11 of its potential returns per unit of risk. Western Copper and is currently generating about -0.02 per unit of risk. If you would invest 5.01 in Australian Oilseeds Holdings on September 1, 2024 and sell it today you would lose (3.51) from holding Australian Oilseeds Holdings or give up 70.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 37.1% |
| Values | Daily Returns |
Australian Oilseeds Holdings vs. Western Copper and
Performance |
| Timeline |
| Australian Oilseeds |
| Western Copper |
Australian Oilseeds and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Oilseeds and Western Copper
The main advantage of trading using opposite Australian Oilseeds and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Oilseeds position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Australian Oilseeds vs. Ambev SA ADR | Australian Oilseeds vs. Diageo PLC ADR | Australian Oilseeds vs. Stepan Company | Australian Oilseeds vs. TFI International |
| Western Copper vs. NioCorp Developments Ltd | Western Copper vs. Teck Resources Ltd | Western Copper vs. Sigma Lithium Resources | Western Copper vs. MP Materials Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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