Correlation Between Canadian Utilities and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Australian Agricultural 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 Canadian Utilities and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Australian Agricultural, you can compare the effects of market volatilities on Canadian Utilities and Australian Agricultural 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 Canadian Utilities with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Australian Agricultural.
Diversification Opportunities for Canadian Utilities and Australian Agricultural
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Canadian and Australian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Australian Agricultural go up and down completely randomly.
Pair Corralation between Canadian Utilities and Australian Agricultural
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.67 times more return on investment than Australian Agricultural. However, Canadian Utilities Limited is 1.48 times less risky than Australian Agricultural. It trades about 0.02 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.01 per unit of risk. If you would invest 2,271 in Canadian Utilities Limited on December 25, 2024 and sell it today you would earn a total of 39.00 from holding Canadian Utilities Limited or generate 1.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Australian Agricultural
Performance |
| Timeline |
| Canadian Utilities |
| Australian Agricultural |
Canadian Utilities and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Australian Agricultural
The main advantage of trading using opposite Canadian Utilities and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Canadian Utilities vs. MagnaChip Semiconductor Corp | Canadian Utilities vs. Elmos Semiconductor SE | Canadian Utilities vs. Lattice Semiconductor | Canadian Utilities vs. PLAYTECH |
| Australian Agricultural vs. Chesapeake Utilities | Australian Agricultural vs. LAir Liquide SA | Australian Agricultural vs. SYSTEMAIR AB | Australian Agricultural vs. Ross Stores |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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