Correlation Between Australian Foundation and GQG Partners

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

By analyzing existing cross correlation between Australian Foundation Investment and GQG Partners DRC, you can compare the effects of market volatilities on Australian Foundation and GQG Partners 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 Foundation with a short position of GQG Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Foundation and GQG Partners.

Diversification Opportunities for Australian Foundation and GQG Partners

0.04

Correlation Coefficient

Australian Foundation  GQG Partners

Significant diversification

The 3 months correlation between Australian and GQG is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Australian Foundation Investme and GQG Partners DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GQG Partners DRC and Australian Foundation 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 Foundation Investment are associated (or correlated) with GQG Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GQG Partners DRC has no effect on the direction of Australian Foundation i.e., Australian Foundation and GQG Partners go up and down completely randomly.

Pair Corralation between Australian Foundation and GQG Partners

Assuming the 90 days trading horizon Australian Foundation Investment is expected to under-perform the GQG Partners. But the stock apears to be less risky and, when comparing its historical volatility, Australian Foundation Investment is 4.35 times less risky than GQG Partners. The stock trades about -0.02 of its potential returns per unit of risk. The GQG Partners DRC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  203.00  in GQG Partners DRC on December 30, 2024 and sell it today you would earn a total of  15.00  from holding GQG Partners DRC or generate 7.39% return on investment over 90 days.

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

Australian Foundation Investme  vs.  GQG Partners DRC

Australian Foundation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Australian Foundation Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Australian Foundation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GQG Partners DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GQG Partners DRC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, GQG Partners may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Australian Foundation and GQG Partners

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

The idea behind Australian Foundation Investment and GQG Partners DRC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.