Correlation Between Sky Metals and Australian United
Can any of the company-specific risk be diversified away by investing in both Sky Metals and Australian United 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 Sky Metals and Australian United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Australian United Investment, you can compare the effects of market volatilities on Sky Metals and Australian United 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 Sky Metals with a short position of Australian United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Australian United.
Diversification Opportunities for Sky Metals and Australian United
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sky and Australian is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United and Sky Metals 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 Sky Metals are associated (or correlated) with Australian United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian United has no effect on the direction of Sky Metals i.e., Sky Metals and Australian United go up and down completely randomly.
Pair Corralation between Sky Metals and Australian United
Assuming the 90 days trading horizon Sky Metals is expected to generate 5.52 times more return on investment than Australian United. However, Sky Metals is 5.52 times more volatile than Australian United Investment. It trades about 0.03 of its potential returns per unit of risk. Australian United Investment is currently generating about 0.03 per unit of risk. If you would invest 4.50 in Sky Metals on December 13, 2024 and sell it today you would earn a total of 0.50 from holding Sky Metals or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Sky Metals vs. Australian United Investment
Performance |
| Timeline |
| Sky Metals |
| Australian United |
Sky Metals and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Australian United
The main advantage of trading using opposite Sky Metals and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals position performs unexpectedly, Australian United 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 United will offset losses from the drop in Australian United's long position.| Sky Metals vs. Janison Education Group | ||
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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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