Correlation Between Falcon Metals and Australian Unity
Can any of the company-specific risk be diversified away by investing in both Falcon Metals 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 Falcon Metals and Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Metals and Australian Unity Office, you can compare the effects of market volatilities on Falcon Metals 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 Falcon Metals with a short position of Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Australian Unity.
Diversification Opportunities for Falcon Metals and Australian Unity
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Falcon and Australian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office and Falcon Metals 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 Falcon Metals 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 Office has no effect on the direction of Falcon Metals i.e., Falcon Metals and Australian Unity go up and down completely randomly.
Pair Corralation between Falcon Metals and Australian Unity
Assuming the 90 days trading horizon Falcon Metals is expected to generate 3.65 times more return on investment than Australian Unity. However, Falcon Metals is 3.65 times more volatile than Australian Unity Office. It trades about 0.02 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.27 per unit of risk. If you would invest 14.00 in Falcon Metals on September 13, 2024 and sell it today you would earn a total of 0.00 from holding Falcon Metals or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Metals vs. Australian Unity Office
Performance |
| Timeline |
| Falcon Metals |
| Australian Unity Office |
Falcon Metals and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Metals and Australian Unity
The main advantage of trading using opposite Falcon Metals and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals 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.| Falcon Metals vs. Northern Star Resources | Falcon Metals vs. Evolution Mining | Falcon Metals vs. Bluescope Steel | Falcon Metals vs. Sandfire Resources NL |
| Australian Unity vs. Scentre Group | Australian Unity vs. Vicinity Centres Re | Australian Unity vs. Charter Hall Retail | Australian Unity vs. Cromwell Property 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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