Correlation Between Australian Agricultural and De Grey

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

By analyzing existing cross correlation between Australian Agricultural and De Grey Mining, you can compare the effects of market volatilities on Australian Agricultural and De Grey 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 De Grey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and De Grey.

Diversification Opportunities for Australian Agricultural and De Grey

0.32

Correlation Coefficient

Australian Agricultural  De Grey

Weak diversification

The 3 months correlation between Australian and DEG is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and De Grey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Grey Mining 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 De Grey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Grey Mining has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and De Grey go up and down completely randomly.

Pair Corralation between Australian Agricultural and De Grey

Assuming the 90 days trading horizon Australian Agricultural is expected to generate 2.67 times less return on investment than De Grey. But when comparing it to its historical volatility, Australian Agricultural is 1.29 times less risky than De Grey. It trades about 0.07 of its potential returns per unit of risk. De Grey Mining is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  180.00  in De Grey Mining on December 22, 2024 and sell it today you would earn a total of  30.00  from holding De Grey Mining or generate 16.67% return on investment over 90 days.

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

Australian Agricultural  vs.  De Grey Mining

Australian Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

De Grey Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining 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, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Agricultural and De Grey

The main advantage of trading using opposite Australian Agricultural and De Grey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, De Grey 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 De Grey will offset losses from the drop in De Grey's long position.

The idea behind Australian Agricultural and De Grey Mining 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.