Correlation Between INDUSTRIAL MINERALS and Australian Agricultural

Can any of the company-specific risk be diversified away by investing in both INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INDUSTRIAL MINERALS LTD and Australian Agricultural, you can compare the effects of market volatilities on INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDUSTRIAL MINERALS and Australian Agricultural.

Diversification Opportunities for INDUSTRIAL MINERALS and Australian Agricultural

0.78

Correlation Coefficient

INDUSTRIAL MINERALS  Australian Agricultural

Poor diversification

The 3 months correlation between INDUSTRIAL and Australian is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding INDUSTRIAL MINERALS LTD and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS LTD 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 INDUSTRIAL MINERALS i.e., INDUSTRIAL MINERALS and Australian Agricultural go up and down completely randomly.

Pair Corralation between INDUSTRIAL MINERALS and Australian Agricultural

Assuming the 90 days horizon INDUSTRIAL MINERALS LTD is expected to generate 4.92 times more return on investment than Australian Agricultural. However, INDUSTRIAL MINERALS is 4.92 times more volatile than Australian Agricultural. It trades about 0.01 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.02 per unit of risk. If you would invest  22.00  in INDUSTRIAL MINERALS LTD on October 24, 2024 and sell it today you would lose (15.70) from holding INDUSTRIAL MINERALS LTD or give up 71.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

INDUSTRIAL MINERALS LTD  vs.  Australian Agricultural

INDUSTRIAL MINERALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDUSTRIAL MINERALS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INDUSTRIAL MINERALS and Australian Agricultural

The main advantage of trading using opposite INDUSTRIAL MINERALS and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDUSTRIAL MINERALS 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.

The idea behind INDUSTRIAL MINERALS LTD and Australian Agricultural 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.