Correlation Between AUST AGRICULTURAL and General Electric

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

By analyzing existing cross correlation between AUST AGRICULTURAL and General Electric, you can compare the effects of market volatilities on AUST AGRICULTURAL and General Electric 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 General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and General Electric.

Diversification Opportunities for AUST AGRICULTURAL and General Electric

-0.06

Correlation Coefficient

AUST AGRICULTURAL  General Electric

Good diversification

The 3 months correlation between AUST and General is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and General Electric go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and General Electric

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the General Electric. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 1.76 times less risky than General Electric. The stock trades about -0.1 of its potential returns per unit of risk. The General Electric is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,721  in General Electric on October 24, 2024 and sell it today you would earn a total of  1,279  from holding General Electric or generate 7.65% 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.  General Electric

AUST AGRICULTURAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

General Electric

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with AUST AGRICULTURAL and General Electric

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

The idea behind AUST AGRICULTURAL and General Electric 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.