Correlation Between Australian Dairy and Latitude Financial

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

By analyzing existing cross correlation between Australian Dairy Farms and Latitude Financial Services, you can compare the effects of market volatilities on Australian Dairy and Latitude Financial 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 Dairy with a short position of Latitude Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Latitude Financial.

Diversification Opportunities for Australian Dairy and Latitude Financial

-0.24

Correlation Coefficient

Australian Dairy  Latitude Financial

Very good diversification

The 3 months correlation between Australian and Latitude is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Latitude Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latitude Financial and Australian Dairy 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 Dairy Farms are associated (or correlated) with Latitude Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latitude Financial has no effect on the direction of Australian Dairy i.e., Australian Dairy and Latitude Financial go up and down completely randomly.

Pair Corralation between Australian Dairy and Latitude Financial

Assuming the 90 days trading horizon Australian Dairy Farms is expected to under-perform the Latitude Financial. In addition to that, Australian Dairy is 6.89 times more volatile than Latitude Financial Services. It trades about -0.04 of its total potential returns per unit of risk. Latitude Financial Services is currently generating about 0.05 per unit of volatility. If you would invest  112.00  in Latitude Financial Services on December 25, 2024 and sell it today you would earn a total of  3.00  from holding Latitude Financial Services or generate 2.68% return on investment over 90 days.

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

Australian Dairy Farms  vs.  Latitude Financial Services

Australian Dairy Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Australian Dairy Farms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Latitude Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Latitude Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Latitude Financial 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 Dairy and Latitude Financial

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

The idea behind Australian Dairy Farms and Latitude Financial Services 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.