Correlation Between Austral Gold and Retail Food

Can any of the company-specific risk be diversified away by investing in both Austral Gold and Retail Food 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 Austral Gold and Retail Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austral Gold and Retail Food Group, you can compare the effects of market volatilities on Austral Gold and Retail Food 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 Austral Gold with a short position of Retail Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austral Gold and Retail Food.

Diversification Opportunities for Austral Gold and Retail Food

-0.18

Correlation Coefficient

Austral Gold  Retail Food

Good diversification

The 3 months correlation between Austral and Retail is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group and Austral Gold 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 Austral Gold are associated (or correlated) with Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of Austral Gold i.e., Austral Gold and Retail Food go up and down completely randomly.

Pair Corralation between Austral Gold and Retail Food

Assuming the 90 days trading horizon Austral Gold is expected to generate 3.24 times more return on investment than Retail Food. However, Austral Gold is 3.24 times more volatile than Retail Food Group. It trades about 0.09 of its potential returns per unit of risk. Retail Food Group is currently generating about 0.05 per unit of risk. If you would invest  2.00  in Austral Gold on September 13, 2024 and sell it today you would earn a total of  0.60  from holding Austral Gold or generate 30.0% return on investment over 90 days.

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

Austral Gold  vs.  Retail Food Group

Austral Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austral Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Retail Food Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Food Group 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, Retail Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Austral Gold and Retail Food

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

The idea behind Austral Gold and Retail Food Group 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.