Correlation Between Australian Bond and Hawsons Iron

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

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

Diversification Opportunities for Australian Bond and Hawsons Iron

0.05

Correlation Coefficient

Australian Bond  Hawsons Iron

Significant diversification

The 3 months correlation between Australian and Hawsons is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Australian Bond Exchange and Hawsons Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawsons Iron and Australian Bond 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 Bond Exchange are associated (or correlated) with Hawsons Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawsons Iron has no effect on the direction of Australian Bond i.e., Australian Bond and Hawsons Iron go up and down completely randomly.

Pair Corralation between Australian Bond and Hawsons Iron

Assuming the 90 days trading horizon Australian Bond Exchange is expected to generate 1.5 times more return on investment than Hawsons Iron. However, Australian Bond is 1.5 times more volatile than Hawsons Iron. It trades about 0.04 of its potential returns per unit of risk. Hawsons Iron is currently generating about -0.03 per unit of risk. If you would invest  3.00  in Australian Bond Exchange on December 23, 2024 and sell it today you would earn a total of  0.10  from holding Australian Bond Exchange or generate 3.33% return on investment over 90 days.

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

Australian Bond Exchange  vs.  Hawsons Iron

Australian Bond Exchange

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Bond Exchange are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Australian Bond unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hawsons Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawsons Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Australian Bond and Hawsons Iron

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

The idea behind Australian Bond Exchange and Hawsons Iron 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.