Correlation Between Resource Base and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Resource Base and Australian 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 Resource Base and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and Australian Agricultural, you can compare the effects of market volatilities on Resource Base and Australian 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 Resource Base with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and Australian Agricultural.
Diversification Opportunities for Resource Base and Australian Agricultural
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Resource and Australian is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Resource Base 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 Resource Base are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Resource Base i.e., Resource Base and Australian Agricultural go up and down completely randomly.
Pair Corralation between Resource Base and Australian Agricultural
Assuming the 90 days trading horizon Resource Base is expected to generate 3.53 times more return on investment than Australian Agricultural. However, Resource Base is 3.53 times more volatile than Australian Agricultural. It trades about 0.05 of its potential returns per unit of risk. Australian Agricultural is currently generating about 0.0 per unit of risk. If you would invest 3.40 in Resource Base on September 12, 2024 and sell it today you would earn a total of 0.30 from holding Resource Base or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Resource Base vs. Australian Agricultural
Performance |
| Timeline |
| Resource Base |
| Australian Agricultural |
Resource Base and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and Australian Agricultural
The main advantage of trading using opposite Resource Base and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, Australian 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Resource Base vs. Oneview Healthcare PLC | Resource Base vs. Infomedia | Resource Base vs. Fisher Paykel Healthcare | Resource Base vs. Oceania Healthcare |
| Australian Agricultural vs. Aurelia Metals | Australian Agricultural vs. Centuria Industrial Reit | Australian Agricultural vs. Cleanaway Waste Management | Australian Agricultural vs. Data3 |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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