Correlation Between Analog Devices and Australian Oilseeds

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

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

Diversification Opportunities for Analog Devices and Australian Oilseeds

-0.47

Correlation Coefficient

Analog Devices  Australian Oilseeds

Very good diversification

The 3 months correlation between Analog and Australian is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Australian Oilseeds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Oilseeds and Analog Devices 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 Analog Devices are associated (or correlated) with Australian Oilseeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Oilseeds has no effect on the direction of Analog Devices i.e., Analog Devices and Australian Oilseeds go up and down completely randomly.

Pair Corralation between Analog Devices and Australian Oilseeds

Considering the 90-day investment horizon Analog Devices is expected to generate 0.36 times more return on investment than Australian Oilseeds. However, Analog Devices is 2.77 times less risky than Australian Oilseeds. It trades about 0.04 of its potential returns per unit of risk. Australian Oilseeds Holdings is currently generating about -0.06 per unit of risk. If you would invest  15,805  in Analog Devices on September 13, 2024 and sell it today you would earn a total of  5,907  from holding Analog Devices or generate 37.37% return on investment over 90 days.

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

Analog Devices  vs.  Australian Oilseeds Holdings

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Australian Oilseeds

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Oilseeds Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Australian Oilseeds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Australian Oilseeds

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

The idea behind Analog Devices and Australian Oilseeds Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.