Correlation Between Australian Agricultural and Collins Foods

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Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Collins Foods 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 Australian Agricultural and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Collins Foods, you can compare the effects of market volatilities on Australian Agricultural and Collins Foods 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 Australian Agricultural with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Collins Foods.

Diversification Opportunities for Australian Agricultural and Collins Foods

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Australian and Collins is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Australian Agricultural 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 Australian Agricultural are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Collins Foods go up and down completely randomly.

Pair Corralation between Australian Agricultural and Collins Foods

Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Collins Foods. In addition to that, Australian Agricultural is 1.04 times more volatile than Collins Foods. It trades about -0.02 of its total potential returns per unit of risk. Collins Foods is currently generating about 0.14 per unit of volatility. If you would invest  772.00  in Collins Foods on September 1, 2024 and sell it today you would earn a total of  87.00  from holding Collins Foods or generate 11.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Australian Agricultural  vs.  Collins Foods

 Performance 
       Timeline  
Australian Agricultural 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Collins Foods 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Collins Foods may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Australian Agricultural and Collins Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Australian Agricultural and Collins Foods

The main advantage of trading using opposite Australian Agricultural and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.
The idea behind Australian Agricultural and Collins Foods 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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