Correlation Between Casio Computer and Australian Agricultural

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

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

Diversification Opportunities for Casio Computer and Australian Agricultural

-0.34

Correlation Coefficient

Casio Computer  Australian Agricultural

Very good diversification

The 3 months correlation between Casio and Australian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer CoLtd and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Casio Computer 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 Casio Computer CoLtd 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 Casio Computer i.e., Casio Computer and Australian Agricultural go up and down completely randomly.

Pair Corralation between Casio Computer and Australian Agricultural

Assuming the 90 days trading horizon Casio Computer CoLtd is expected to generate 0.81 times more return on investment than Australian Agricultural. However, Casio Computer CoLtd is 1.24 times less risky than Australian Agricultural. It trades about -0.01 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.02 per unit of risk. If you would invest  915.00  in Casio Computer CoLtd on October 26, 2024 and sell it today you would lose (138.00) from holding Casio Computer CoLtd or give up 15.08% of portfolio value over 90 days.

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

Casio Computer CoLtd  vs.  Australian Agricultural

Casio Computer CoLtd

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Casio Computer reported solid returns over the last few months and may actually be approaching a breakup point.

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Casio Computer and Australian Agricultural

The main advantage of trading using opposite Casio Computer and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer CoLtd 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.