Correlation Between Russell Australian and BetaShares Global
Can any of the company-specific risk be diversified away by investing in both Russell Australian and BetaShares Global 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 Russell Australian and BetaShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell Australian Government and BetaShares Global Government, you can compare the effects of market volatilities on Russell Australian and BetaShares Global 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 Russell Australian with a short position of BetaShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell Australian and BetaShares Global.
Diversification Opportunities for Russell Australian and BetaShares Global
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Russell and BetaShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Russell Australian Government and BetaShares Global Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Global and Russell Australian 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 Russell Australian Government are associated (or correlated) with BetaShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Global has no effect on the direction of Russell Australian i.e., Russell Australian and BetaShares Global go up and down completely randomly.
Pair Corralation between Russell Australian and BetaShares Global
Assuming the 90 days trading horizon Russell Australian is expected to generate 1.8 times less return on investment than BetaShares Global. But when comparing it to its historical volatility, Russell Australian Government is 2.3 times less risky than BetaShares Global. It trades about 0.06 of its potential returns per unit of risk. BetaShares Global Government is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,374 in BetaShares Global Government on August 29, 2024 and sell it today you would earn a total of 10.00 from holding BetaShares Global Government or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell Australian Government vs. BetaShares Global Government
Performance |
| Timeline |
| Russell Australian |
| BetaShares Global |
Russell Australian and BetaShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell Australian and BetaShares Global
The main advantage of trading using opposite Russell Australian and BetaShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Australian position performs unexpectedly, BetaShares Global 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 BetaShares Global will offset losses from the drop in BetaShares Global's long position.The idea behind Russell Australian Government and BetaShares Global Government pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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