Correlation Between Metro Mining and Auswide Bank
Can any of the company-specific risk be diversified away by investing in both Metro Mining and Auswide Bank 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 Metro Mining and Auswide Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Mining and Auswide Bank, you can compare the effects of market volatilities on Metro Mining and Auswide Bank 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 Metro Mining with a short position of Auswide Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Mining and Auswide Bank.
Diversification Opportunities for Metro Mining and Auswide Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metro and Auswide is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metro Mining and Auswide Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auswide Bank and Metro Mining 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 Metro Mining are associated (or correlated) with Auswide Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auswide Bank has no effect on the direction of Metro Mining i.e., Metro Mining and Auswide Bank go up and down completely randomly.
Pair Corralation between Metro Mining and Auswide Bank
Assuming the 90 days trading horizon Metro Mining is expected to under-perform the Auswide Bank. But the stock apears to be less risky and, when comparing its historical volatility, Metro Mining is 1.06 times less risky than Auswide Bank. The stock trades about -0.17 of its potential returns per unit of risk. The Auswide Bank is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 407.00 in Auswide Bank on October 11, 2024 and sell it today you would earn a total of 68.00 from holding Auswide Bank or generate 16.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Mining vs. Auswide Bank
Performance |
| Timeline |
| Metro Mining |
| Auswide Bank |
Metro Mining and Auswide Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Mining and Auswide Bank
The main advantage of trading using opposite Metro Mining and Auswide Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Mining position performs unexpectedly, Auswide Bank 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 Auswide Bank will offset losses from the drop in Auswide Bank's long position.| Metro Mining vs. Seven West Media | Metro Mining vs. Star Entertainment Group | Metro Mining vs. Super Retail Group | Metro Mining vs. Microequities Asset Management |
| Auswide Bank vs. Zoom2u Technologies | Auswide Bank vs. Premier Investments | Auswide Bank vs. Regal Investment | Auswide Bank vs. Hotel Property Investments |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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