Correlation Between Beach Energy and Australian Unity

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

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

Diversification Opportunities for Beach Energy and Australian Unity

-0.34

Correlation Coefficient

Beach Energy  Australian Unity

Very good diversification

The 3 months correlation between Beach and Australian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office and Beach Energy 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 Beach Energy are associated (or correlated) with Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Beach Energy i.e., Beach Energy and Australian Unity go up and down completely randomly.

Pair Corralation between Beach Energy and Australian Unity

Assuming the 90 days trading horizon Beach Energy is expected to generate 0.99 times more return on investment than Australian Unity. However, Beach Energy is 1.01 times less risky than Australian Unity. It trades about 0.0 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.01 per unit of risk. If you would invest  152.00  in Beach Energy on October 4, 2024 and sell it today you would lose (12.00) from holding Beach Energy or give up 7.89% of portfolio value over 90 days.

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

Beach Energy  vs.  Australian Unity Office

Beach Energy

Risk-Adjusted Performance

6 of 100

Modest

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

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Beach Energy and Australian Unity

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

The idea behind Beach Energy and Australian Unity Office 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.