Correlation Between Australian Agricultural and Casio Computer

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

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

Diversification Opportunities for Australian Agricultural and Casio Computer

-0.34

Correlation Coefficient

Australian Agricultural  Casio Computer

Very good diversification

The 3 months correlation between Australian and Casio is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd and Australian Agricultural 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 Agricultural are associated (or correlated) with Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Casio Computer go up and down completely randomly.

Pair Corralation between Australian Agricultural and Casio Computer

Assuming the 90 days horizon Australian Agricultural is expected to under-perform the Casio Computer. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 1.46 times less risky than Casio Computer. The stock trades about -0.13 of its potential returns per unit of risk. The Casio Computer CoLtd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  781.00  in Casio Computer CoLtd on October 11, 2024 and sell it today you would lose (8.00) from holding Casio Computer CoLtd or give up 1.02% of portfolio value over 90 days.

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

Australian Agricultural  vs.  Casio Computer CoLtd

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Casio Computer CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Australian Agricultural and Casio Computer

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

The idea behind Australian Agricultural and Casio Computer CoLtd 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.