Correlation Between AUST AGRICULTURAL and Dairy Farm

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

By analyzing existing cross correlation between AUST AGRICULTURAL and Dairy Farm International, you can compare the effects of market volatilities on AUST AGRICULTURAL and Dairy Farm 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 AUST AGRICULTURAL with a short position of Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and Dairy Farm.

Diversification Opportunities for AUST AGRICULTURAL and Dairy Farm

-0.12

Correlation Coefficient

AUST AGRICULTURAL  Dairy Farm

Good diversification

The 3 months correlation between AUST and Dairy is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International and AUST 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 AUST AGRICULTURAL are associated (or correlated) with Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Dairy Farm go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and Dairy Farm

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to generate 0.62 times more return on investment than Dairy Farm. However, AUST AGRICULTURAL is 1.6 times less risky than Dairy Farm. It trades about 0.14 of its potential returns per unit of risk. Dairy Farm International is currently generating about -0.04 per unit of risk. If you would invest  82.00  in AUST AGRICULTURAL on December 2, 2024 and sell it today you would earn a total of  6.00  from holding AUST AGRICULTURAL or generate 7.32% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  Dairy Farm International

AUST AGRICULTURAL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUST AGRICULTURAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AUST AGRICULTURAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AUST AGRICULTURAL and Dairy Farm

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

The idea behind AUST AGRICULTURAL and Dairy Farm International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.