Correlation Between Australian Agricultural and Global Health

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

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

Diversification Opportunities for Australian Agricultural and Global Health

0.32

Correlation Coefficient

Australian Agricultural  Global Health

Weak diversification

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

Pair Corralation between Australian Agricultural and Global Health

Assuming the 90 days trading horizon Australian Agricultural is expected to generate 21.98 times less return on investment than Global Health. But when comparing it to its historical volatility, Australian Agricultural is 3.04 times less risky than Global Health. It trades about 0.01 of its potential returns per unit of risk. Global Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Global Health on October 2, 2024 and sell it today you would earn a total of  3.00  from holding Global Health or generate 27.27% 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.  Global Health

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.

Global Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Global Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Australian Agricultural and Global Health

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

The idea behind Australian Agricultural and Global Health 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.