Correlation Between North American and AUST AGRICULTURAL
Can any of the company-specific risk be diversified away by investing in both North American and AUST AGRICULTURAL 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 North American and AUST AGRICULTURAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and AUST AGRICULTURAL, you can compare the effects of market volatilities on North American and AUST AGRICULTURAL 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 North American with a short position of AUST AGRICULTURAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and AUST AGRICULTURAL.
Diversification Opportunities for North American and AUST AGRICULTURAL
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and AUST is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL and North American 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 North American Construction are associated (or correlated) with AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of North American i.e., North American and AUST AGRICULTURAL go up and down completely randomly.
Pair Corralation between North American and AUST AGRICULTURAL
Assuming the 90 days horizon North American Construction is expected to generate 1.63 times more return on investment than AUST AGRICULTURAL. However, North American is 1.63 times more volatile than AUST AGRICULTURAL. It trades about 0.04 of its potential returns per unit of risk. AUST AGRICULTURAL is currently generating about -0.02 per unit of risk. If you would invest 1,338 in North American Construction on September 1, 2024 and sell it today you would earn a total of 452.00 from holding North American Construction or generate 33.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. AUST AGRICULTURAL
Performance |
| Timeline |
| North American Const |
| AUST AGRICULTURAL |
North American and AUST AGRICULTURAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and AUST AGRICULTURAL
The main advantage of trading using opposite North American and AUST AGRICULTURAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, AUST AGRICULTURAL 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 AUST AGRICULTURAL will offset losses from the drop in AUST AGRICULTURAL's long position.| North American vs. Halliburton | North American vs. Tenaris SA | North American vs. Superior Plus Corp | North American vs. NMI Holdings |
| AUST AGRICULTURAL vs. SIVERS SEMICONDUCTORS AB | AUST AGRICULTURAL vs. Darden Restaurants | AUST AGRICULTURAL vs. Reliance Steel Aluminum | AUST AGRICULTURAL vs. Q2M Managementberatung AG |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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