Correlation Between Australian Agricultural and Ebr Systems

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

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

Diversification Opportunities for Australian Agricultural and Ebr Systems

0.27

Correlation Coefficient

Australian Agricultural  Ebr Systems

Modest diversification

The 3 months correlation between Australian and Ebr is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Ebr Systems CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebr Systems CDR 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 Ebr Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebr Systems CDR has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Ebr Systems go up and down completely randomly.

Pair Corralation between Australian Agricultural and Ebr Systems

Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Ebr Systems. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 8.87 times less risky than Ebr Systems. The stock trades about -0.04 of its potential returns per unit of risk. The Ebr Systems CDR is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Ebr Systems CDR on October 11, 2024 and sell it today you would earn a total of  47.00  from holding Ebr Systems CDR or generate 48.96% 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.  Ebr Systems CDR

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. 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.

Ebr Systems CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ebr Systems CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ebr Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Agricultural and Ebr Systems

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

The idea behind Australian Agricultural and Ebr Systems CDR 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 Transaction History module to view history of all your transactions and understand their impact on performance.