Correlation Between CVB Financial and Australian Agricultural

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

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

Diversification Opportunities for CVB Financial and Australian Agricultural

-0.66

Correlation Coefficient

CVB Financial  Australian Agricultural

Excellent diversification

The 3 months correlation between CVB and Australian is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial Corp and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and CVB Financial 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 CVB Financial Corp are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of CVB Financial i.e., CVB Financial and Australian Agricultural go up and down completely randomly.

Pair Corralation between CVB Financial and Australian Agricultural

Assuming the 90 days horizon CVB Financial Corp is expected to under-perform the Australian Agricultural. In addition to that, CVB Financial is 1.18 times more volatile than Australian Agricultural. It trades about -0.16 of its total potential returns per unit of risk. Australian Agricultural is currently generating about 0.06 per unit of volatility. If you would invest  83.00  in Australian Agricultural on December 20, 2024 and sell it today you would earn a total of  4.00  from holding Australian Agricultural or generate 4.82% return on investment over 90 days.

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

CVB Financial Corp  vs.  Australian Agricultural

CVB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Australian Agricultural

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CVB Financial and Australian Agricultural

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

The idea behind CVB Financial Corp and Australian Agricultural 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.