Correlation Between L1 Long and Australian United
Can any of the company-specific risk be diversified away by investing in both L1 Long 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 L1 Long and Australian United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L1 Long Short and Australian United Investment, you can compare the effects of market volatilities on L1 Long 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 L1 Long with a short position of Australian United. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and Australian United.
Diversification Opportunities for L1 Long and Australian United
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LSF and Australian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United and L1 Long 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 L1 Long Short 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 L1 Long i.e., L1 Long and Australian United go up and down completely randomly.
Pair Corralation between L1 Long and Australian United
Assuming the 90 days trading horizon L1 Long Short is expected to under-perform the Australian United. But the stock apears to be less risky and, when comparing its historical volatility, L1 Long Short is 1.31 times less risky than Australian United. The stock trades about -0.19 of its potential returns per unit of risk. The Australian United Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,058 in Australian United Investment on November 4, 2024 and sell it today you would earn a total of 9.00 from holding Australian United Investment or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
L1 Long Short vs. Australian United Investment
Performance |
| Timeline |
| L1 Long Short |
| Australian United |
L1 Long and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L1 Long and Australian United
The main advantage of trading using opposite L1 Long and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long 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.| L1 Long vs. Genetic Technologies | L1 Long vs. Ainsworth Game Technology | L1 Long vs. Djerriwarrh Investments | L1 Long vs. Pinnacle Investment Management |
| Australian United vs. Complii FinTech Solutions | Australian United vs. Stelar Metals | Australian United vs. Technology One | Australian United vs. Hansen Technologies |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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