Correlation Between Australian Strategic and United Tractors

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

Diversification Opportunities for Australian Strategic and United Tractors

0.1

Correlation Coefficient

Australian Strategic  United Tractors

Average diversification

The 3 months correlation between Australian and United is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and United Tractors Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Tractors Tbk 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 United Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Tractors Tbk has no effect on the direction of Australian Strategic i.e., Australian Strategic and United Tractors go up and down completely randomly.

Pair Corralation between Australian Strategic and United Tractors

Assuming the 90 days horizon Australian Strategic Materials is expected to under-perform the United Tractors. In addition to that, Australian Strategic is 2.78 times more volatile than United Tractors Tbk. It trades about -0.01 of its total potential returns per unit of risk. United Tractors Tbk is currently generating about -0.01 per unit of volatility. If you would invest  3,485  in United Tractors Tbk on September 3, 2024 and sell it today you would lose (62.00) from holding United Tractors Tbk or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Australian Strategic Materials  vs.  United Tractors Tbk

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. Despite nearly stable primary indicators, Australian Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Tractors Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Tractors Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, United Tractors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Australian Strategic and United Tractors

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

The idea behind Australian Strategic Materials and United Tractors Tbk 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.