Correlation Between Summit Resources and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Summit Resources 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 Summit Resources and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Resources Limited and Australian Agricultural, you can compare the effects of market volatilities on Summit Resources 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 Summit Resources with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Resources and Australian Agricultural.
Diversification Opportunities for Summit Resources and Australian Agricultural
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and Australian is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Summit Resources Limited and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Summit Resources 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 Summit Resources Limited 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 Summit Resources i.e., Summit Resources and Australian Agricultural go up and down completely randomly.
Pair Corralation between Summit Resources and Australian Agricultural
Assuming the 90 days trading horizon Summit Resources Limited is expected to generate 19.53 times more return on investment than Australian Agricultural. However, Summit Resources is 19.53 times more volatile than Australian Agricultural. It trades about 0.08 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.05 per unit of risk. If you would invest 0.40 in Summit Resources Limited on August 30, 2024 and sell it today you would lose (0.10) from holding Summit Resources Limited or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Summit Resources Limited vs. Australian Agricultural
Performance |
| Timeline |
| Summit Resources |
| Australian Agricultural |
Summit Resources and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Resources and Australian Agricultural
The main advantage of trading using opposite Summit Resources and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Resources 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.| Summit Resources vs. Talisman Mining | Summit Resources vs. Hotel Property Investments | Summit Resources vs. Metro Mining | Summit Resources vs. MFF Capital Investments |
| Australian Agricultural vs. Champion Iron | Australian Agricultural vs. Lendlease Group | Australian Agricultural vs. Iron Road | Australian Agricultural vs. Legacy Iron Ore |
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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