Correlation Between Australian Strategic and SportsHero

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

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

Diversification Opportunities for Australian Strategic and SportsHero

-0.66

Correlation Coefficient

Australian Strategic  SportsHero

Excellent diversification

The 3 months correlation between Australian and SportsHero is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and SportsHero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SportsHero and Australian Strategic 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 Strategic Materials are associated (or correlated) with SportsHero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SportsHero has no effect on the direction of Australian Strategic i.e., Australian Strategic and SportsHero go up and down completely randomly.

Pair Corralation between Australian Strategic and SportsHero

Assuming the 90 days trading horizon Australian Strategic is expected to generate 10.41 times less return on investment than SportsHero. But when comparing it to its historical volatility, Australian Strategic Materials is 2.17 times less risky than SportsHero. It trades about 0.03 of its potential returns per unit of risk. SportsHero is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.40  in SportsHero on October 6, 2024 and sell it today you would earn a total of  0.50  from holding SportsHero or generate 35.71% return on investment over 90 days.

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

Australian Strategic Materials  vs.  SportsHero

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

SportsHero

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SportsHero are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SportsHero unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Strategic and SportsHero

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

The idea behind Australian Strategic Materials and SportsHero 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.