Correlation Between Platinum Asset and Ecofibre
Can any of the company-specific risk be diversified away by investing in both Platinum Asset and Ecofibre 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 Platinum Asset and Ecofibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Platinum Asset Management and Ecofibre, you can compare the effects of market volatilities on Platinum Asset and Ecofibre 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 Platinum Asset with a short position of Ecofibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum Asset and Ecofibre.
Diversification Opportunities for Platinum Asset and Ecofibre
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Platinum and Ecofibre is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Asset Management and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre and Platinum Asset 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 Platinum Asset Management are associated (or correlated) with Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Platinum Asset i.e., Platinum Asset and Ecofibre go up and down completely randomly.
Pair Corralation between Platinum Asset and Ecofibre
Assuming the 90 days trading horizon Platinum Asset Management is expected to under-perform the Ecofibre. But the stock apears to be less risky and, when comparing its historical volatility, Platinum Asset Management is 2.15 times less risky than Ecofibre. The stock trades about -0.46 of its potential returns per unit of risk. The Ecofibre is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 4.90 in Ecofibre on August 28, 2024 and sell it today you would lose (0.70) from holding Ecofibre or give up 14.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Platinum Asset Management vs. Ecofibre
Performance |
| Timeline |
| Platinum Asset Management |
| Ecofibre |
Platinum Asset and Ecofibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Platinum Asset and Ecofibre
The main advantage of trading using opposite Platinum Asset and Ecofibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum Asset position performs unexpectedly, Ecofibre 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 Ecofibre will offset losses from the drop in Ecofibre's long position.| Platinum Asset vs. National Australia Bank | Platinum Asset vs. National Australia Bank | Platinum Asset vs. Westpac Banking | Platinum Asset vs. National Australia Bank |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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