Correlation Between Carlton Investments and Australian Dollar

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

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

Diversification Opportunities for Carlton Investments and Australian Dollar

-0.15

Correlation Coefficient

Carlton Investments  Australian Dollar

Good diversification

The 3 months correlation between Carlton and Australian is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Carlton Investments and Australian Dollar Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dollar and Carlton Investments 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 Carlton Investments are associated (or correlated) with Australian Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dollar has no effect on the direction of Carlton Investments i.e., Carlton Investments and Australian Dollar go up and down completely randomly.

Pair Corralation between Carlton Investments and Australian Dollar

Assuming the 90 days trading horizon Carlton Investments is expected to generate 2.45 times more return on investment than Australian Dollar. However, Carlton Investments is 2.45 times more volatile than Australian Dollar Currency. It trades about -0.09 of its potential returns per unit of risk. Australian Dollar Currency is currently generating about -0.22 per unit of risk. If you would invest  3,075  in Carlton Investments on October 6, 2024 and sell it today you would lose (54.00) from holding Carlton Investments or give up 1.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Carlton Investments  vs.  Australian Dollar Currency

Pair Trading with Carlton Investments and Australian Dollar

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

The idea behind Carlton Investments and Australian Dollar Currency 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.