Correlation Between Australian Agricultural and USU Software

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

By analyzing existing cross correlation between Australian Agricultural and USU Software AG, you can compare the effects of market volatilities on Australian Agricultural and USU Software 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 USU Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and USU Software.

Diversification Opportunities for Australian Agricultural and USU Software

0.75

Correlation Coefficient

Australian Agricultural  USU Software

Poor diversification

The 3 months correlation between Australian and USU is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and USU Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USU Software AG 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 USU Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USU Software AG has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and USU Software go up and down completely randomly.

Pair Corralation between Australian Agricultural and USU Software

Assuming the 90 days horizon Australian Agricultural is expected to generate 1.66 times less return on investment than USU Software. In addition to that, Australian Agricultural is 1.02 times more volatile than USU Software AG. It trades about 0.05 of its total potential returns per unit of risk. USU Software AG is currently generating about 0.08 per unit of volatility. If you would invest  2,140  in USU Software AG on December 22, 2024 and sell it today you would earn a total of  140.00  from holding USU Software AG or generate 6.54% return on investment over 90 days.

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

Australian Agricultural  vs.  USU Software AG

Australian Agricultural

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

USU Software AG

Risk-Adjusted Performance

Modest

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

Pair Trading with Australian Agricultural and USU Software

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

The idea behind Australian Agricultural and USU Software AG 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.