Correlation Between AUST AGRICULTURAL and TOTAL GABON

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

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

Diversification Opportunities for AUST AGRICULTURAL and TOTAL GABON

0.39

Correlation Coefficient

AUST AGRICULTURAL  TOTAL GABON

Weak diversification

The 3 months correlation between AUST and TOTAL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON 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 TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and TOTAL GABON go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and TOTAL GABON

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to generate 18.62 times less return on investment than TOTAL GABON. But when comparing it to its historical volatility, AUST AGRICULTURAL is 4.04 times less risky than TOTAL GABON. It trades about 0.03 of its potential returns per unit of risk. TOTAL GABON is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,748  in TOTAL GABON on December 29, 2024 and sell it today you would earn a total of  7,202  from holding TOTAL GABON or generate 61.3% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  TOTAL GABON

AUST AGRICULTURAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AUST AGRICULTURAL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TOTAL GABON

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL GABON are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TOTAL GABON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUST AGRICULTURAL and TOTAL GABON

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

The idea behind AUST AGRICULTURAL and TOTAL GABON 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.