Correlation Between Australia and CSL

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

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

Diversification Opportunities for Australia and CSL

-0.18

Correlation Coefficient

Australia  CSL

Good diversification

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

Pair Corralation between Australia and CSL

Assuming the 90 days trading horizon Australia and New is expected to under-perform the CSL. In addition to that, Australia is 1.23 times more volatile than CSL. It trades about -0.16 of its total potential returns per unit of risk. CSL is currently generating about -0.14 per unit of volatility. If you would invest  29,413  in CSL on September 22, 2024 and sell it today you would lose (1,756) from holding CSL or give up 5.97% of portfolio value over 90 days.

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

Australia and New  vs.  CSL

Australia and New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australia and New 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.

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, CSL 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 Australia and CSL

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

The idea behind Australia and New and CSL 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..