Correlation Between Energy Resources and Australian Bond
Can any of the company-specific risk be diversified away by investing in both Energy Resources and Australian Bond 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 Energy Resources and Australian Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and Australian Bond Exchange, you can compare the effects of market volatilities on Energy Resources and Australian Bond 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 Energy Resources with a short position of Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Australian Bond.
Diversification Opportunities for Energy Resources and Australian Bond
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Energy and Australian is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange and Energy 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 Energy Resources are associated (or correlated) with Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of Energy Resources i.e., Energy Resources and Australian Bond go up and down completely randomly.
Pair Corralation between Energy Resources and Australian Bond
Assuming the 90 days trading horizon Energy Resources is expected to generate 3.97 times more return on investment than Australian Bond. However, Energy Resources is 3.97 times more volatile than Australian Bond Exchange. It trades about 0.12 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about 0.03 per unit of risk. If you would invest 0.20 in Energy Resources on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Energy Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Resources vs. Australian Bond Exchange
Performance |
| Timeline |
| Energy Resources |
| Australian Bond Exchange |
Energy Resources and Australian Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and Australian Bond
The main advantage of trading using opposite Energy Resources and Australian Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, Australian Bond 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 Bond will offset losses from the drop in Australian Bond's long position.| Energy Resources vs. Aeon Metals | Energy Resources vs. ACDC Metals | Energy Resources vs. Charter Hall Retail | Energy Resources vs. Stelar Metals |
| Australian Bond vs. Renascor Resources | Australian Bond vs. Venus Metals | Australian Bond vs. Havilah Resources | Australian Bond vs. Asara Resources |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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