Correlation Between Seven West and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Seven West 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 Seven West and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seven West Media and Australian Agricultural, you can compare the effects of market volatilities on Seven West 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 Seven West with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and Australian Agricultural.
Diversification Opportunities for Seven West and Australian Agricultural
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Seven and Australian is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Seven West 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 Seven West Media 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 Seven West i.e., Seven West and Australian Agricultural go up and down completely randomly.
Pair Corralation between Seven West and Australian Agricultural
Assuming the 90 days trading horizon Seven West Media is expected to under-perform the Australian Agricultural. In addition to that, Seven West is 2.57 times more volatile than Australian Agricultural. It trades about -0.07 of its total potential returns per unit of risk. Australian Agricultural is currently generating about -0.02 per unit of volatility. If you would invest 140.00 in Australian Agricultural on September 2, 2024 and sell it today you would lose (3.00) from holding Australian Agricultural or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seven West Media vs. Australian Agricultural
Performance |
| Timeline |
| Seven West Media |
| Australian Agricultural |
Seven West and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seven West and Australian Agricultural
The main advantage of trading using opposite Seven West and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West 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.| Seven West vs. Aneka Tambang Tbk | Seven West vs. BHP Group Limited | Seven West vs. Commonwealth Bank of | Seven West vs. Commonwealth Bank of |
| Australian Agricultural vs. Aneka Tambang Tbk | Australian Agricultural vs. Commonwealth Bank of | Australian Agricultural vs. Australia and New | Australian Agricultural vs. ANZ Group Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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