Correlation Between EROAD and Australian United
Can any of the company-specific risk be diversified away by investing in both EROAD and Australian United 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 EROAD and Australian United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Australian United Investment, you can compare the effects of market volatilities on EROAD and Australian United 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 EROAD with a short position of Australian United. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Australian United.
Diversification Opportunities for EROAD and Australian United
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EROAD and Australian is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United and EROAD 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 EROAD are associated (or correlated) with Australian United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian United has no effect on the direction of EROAD i.e., EROAD and Australian United go up and down completely randomly.
Pair Corralation between EROAD and Australian United
Assuming the 90 days trading horizon EROAD is expected to generate 5.37 times more return on investment than Australian United. However, EROAD is 5.37 times more volatile than Australian United Investment. It trades about 0.03 of its potential returns per unit of risk. Australian United Investment is currently generating about 0.08 per unit of risk. If you would invest 77.00 in EROAD on August 29, 2024 and sell it today you would earn a total of 7.00 from holding EROAD or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EROAD vs. Australian United Investment
Performance |
| Timeline |
| EROAD |
| Australian United |
EROAD and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Australian United
The main advantage of trading using opposite EROAD and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD position performs unexpectedly, Australian United 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 United will offset losses from the drop in Australian United's long position.The idea behind EROAD and Australian United Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Australian United vs. Global Health | Australian United vs. Toys R Us | Australian United vs. Tombador Iron | Australian United vs. Aussie Broadband |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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