Correlation Between Australian Unity and Evolution Mining

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

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

Diversification Opportunities for Australian Unity and Evolution Mining

-0.36

Correlation Coefficient

Australian Unity  Evolution Mining

Very good diversification

The 3 months correlation between Australian and Evolution is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and Australian Unity 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 Unity Office are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Australian Unity i.e., Australian Unity and Evolution Mining go up and down completely randomly.

Pair Corralation between Australian Unity and Evolution Mining

Assuming the 90 days trading horizon Australian Unity Office is expected to generate 0.24 times more return on investment than Evolution Mining. However, Australian Unity Office is 4.11 times less risky than Evolution Mining. It trades about 0.25 of its potential returns per unit of risk. Evolution Mining is currently generating about -0.06 per unit of risk. If you would invest  106.00  in Australian Unity Office on September 25, 2024 and sell it today you would earn a total of  3.00  from holding Australian Unity Office or generate 2.83% return on investment over 90 days.

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

Australian Unity Office  vs.  Evolution Mining

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

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

Evolution Mining

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Australian Unity and Evolution Mining

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

The idea behind Australian Unity Office and Evolution Mining 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.