Correlation Between Australia and Sky Metals

Can any of the company-specific risk be diversified away by investing in both Australia and Sky Metals 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 Sky Metals 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 Sky Metals, you can compare the effects of market volatilities on Australia and Sky Metals 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 Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australia and Sky Metals.

Diversification Opportunities for Australia and Sky Metals

0.29

Correlation Coefficient

Australia  Sky Metals

Modest diversification

The 3 months correlation between Australia and Sky is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Australia and New and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals 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 Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Australia i.e., Australia and Sky Metals go up and down completely randomly.

Pair Corralation between Australia and Sky Metals

Assuming the 90 days trading horizon Australia and New is expected to generate 0.44 times more return on investment than Sky Metals. However, Australia and New is 2.3 times less risky than Sky Metals. It trades about 0.03 of its potential returns per unit of risk. Sky Metals is currently generating about -0.04 per unit of risk. If you would invest  2,882  in Australia and New on December 27, 2024 and sell it today you would earn a total of  62.00  from holding Australia and New or generate 2.15% return on investment over 90 days.

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

Australia and New  vs.  Sky Metals

Australia and New

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australia and New are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sky Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sky Metals 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.

Pair Trading with Australia and Sky Metals

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

The idea behind Australia and New and Sky Metals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..