Correlation Between Computershare and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both Computershare and Advanced Braking 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 Computershare and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Computershare and Advanced Braking Technology, you can compare the effects of market volatilities on Computershare and Advanced Braking 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 Computershare with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computershare and Advanced Braking.
Diversification Opportunities for Computershare and Advanced Braking
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Computershare and Advanced is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Computershare 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 Computershare are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Computershare i.e., Computershare and Advanced Braking go up and down completely randomly.
Pair Corralation between Computershare and Advanced Braking
Assuming the 90 days trading horizon Computershare is expected to generate 2.22 times less return on investment than Advanced Braking. But when comparing it to its historical volatility, Computershare is 2.12 times less risky than Advanced Braking. It trades about 0.09 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5.60 in Advanced Braking Technology on August 25, 2024 and sell it today you would earn a total of 3.30 from holding Advanced Braking Technology or generate 58.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Computershare vs. Advanced Braking Technology
Performance |
| Timeline |
| Computershare |
| Advanced Braking Tec |
Computershare and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Computershare and Advanced Braking
The main advantage of trading using opposite Computershare and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computershare position performs unexpectedly, Advanced Braking 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 Advanced Braking will offset losses from the drop in Advanced Braking's long position.| Computershare vs. Mayfield Childcare | Computershare vs. Super Retail Group | Computershare vs. Dexus Convenience Retail | Computershare vs. Microequities Asset Management |
| Advanced Braking vs. Insignia Financial | Advanced Braking vs. Commonwealth Bank of | Advanced Braking vs. Kingsrose Mining | Advanced Braking vs. National Australia Bank |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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