Correlation Between EQ Resources and Australian Unity
Can any of the company-specific risk be diversified away by investing in both EQ Resources and Australian Unity 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 EQ Resources and Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EQ Resources and Australian Unity Ltd, you can compare the effects of market volatilities on EQ Resources and Australian Unity 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 EQ Resources with a short position of Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQ Resources and Australian Unity.
Diversification Opportunities for EQ Resources and Australian Unity
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EQR and Australian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EQ Resources and Australian Unity Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity and EQ Resources 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 EQ Resources are associated (or correlated) with Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity has no effect on the direction of EQ Resources i.e., EQ Resources and Australian Unity go up and down completely randomly.
Pair Corralation between EQ Resources and Australian Unity
Assuming the 90 days trading horizon EQ Resources is expected to generate 9.19 times more return on investment than Australian Unity. However, EQ Resources is 9.19 times more volatile than Australian Unity Ltd. It trades about 0.01 of its potential returns per unit of risk. Australian Unity Ltd is currently generating about -0.04 per unit of risk. If you would invest 5.20 in EQ Resources on August 29, 2024 and sell it today you would lose (0.10) from holding EQ Resources or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EQ Resources vs. Australian Unity Ltd
Performance |
| Timeline |
| EQ Resources |
| Australian Unity |
EQ Resources and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EQ Resources and Australian Unity
The main advantage of trading using opposite EQ Resources and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQ Resources position performs unexpectedly, Australian Unity 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 Unity will offset losses from the drop in Australian Unity's long position.| EQ Resources vs. Ainsworth Game Technology | EQ Resources vs. COAST ENTERTAINMENT HOLDINGS | EQ Resources vs. Homeco Daily Needs | EQ Resources vs. Seven West Media |
| Australian Unity vs. Homeco Daily Needs | Australian Unity vs. Kneomedia | Australian Unity vs. Dicker Data | Australian Unity vs. Autosports Group |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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