Correlation Between SportsHero and Australian Dairy
Can any of the company-specific risk be diversified away by investing in both SportsHero and Australian Dairy 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 SportsHero and Australian Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SportsHero and Australian Dairy Farms, you can compare the effects of market volatilities on SportsHero and Australian Dairy 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 SportsHero with a short position of Australian Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SportsHero and Australian Dairy.
Diversification Opportunities for SportsHero and Australian Dairy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SportsHero and Australian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SportsHero and Australian Dairy Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dairy Farms and SportsHero 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 SportsHero are associated (or correlated) with Australian Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dairy Farms has no effect on the direction of SportsHero i.e., SportsHero and Australian Dairy go up and down completely randomly.
Pair Corralation between SportsHero and Australian Dairy
Assuming the 90 days trading horizon SportsHero is expected to generate 1.19 times more return on investment than Australian Dairy. However, SportsHero is 1.19 times more volatile than Australian Dairy Farms. It trades about 0.27 of its potential returns per unit of risk. Australian Dairy Farms is currently generating about 0.23 per unit of risk. If you would invest 0.70 in SportsHero on September 3, 2024 and sell it today you would earn a total of 1.30 from holding SportsHero or generate 185.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SportsHero vs. Australian Dairy Farms
Performance |
| Timeline |
| SportsHero |
| Australian Dairy Farms |
SportsHero and Australian Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SportsHero and Australian Dairy
The main advantage of trading using opposite SportsHero and Australian Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SportsHero position performs unexpectedly, Australian Dairy 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 Dairy will offset losses from the drop in Australian Dairy's long position.| SportsHero vs. Encounter Resources | SportsHero vs. Tlou Energy | SportsHero vs. Superior Resources | SportsHero vs. Peel Mining |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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