Correlation Between Australian Oilseeds and CHS

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

By analyzing existing cross correlation between Australian Oilseeds Holdings and CHS Inc CN, you can compare the effects of market volatilities on Australian Oilseeds and CHS 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 Australian Oilseeds with a short position of CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Oilseeds and CHS.

Diversification Opportunities for Australian Oilseeds and CHS

0.37

Correlation Coefficient

Australian Oilseeds  CHS

Weak diversification

The 3 months correlation between Australian and CHS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Australian Oilseeds Holdings and CHS Inc CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CN and Australian Oilseeds 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 Australian Oilseeds Holdings are associated (or correlated) with CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CN has no effect on the direction of Australian Oilseeds i.e., Australian Oilseeds and CHS go up and down completely randomly.

Pair Corralation between Australian Oilseeds and CHS

Given the investment horizon of 90 days Australian Oilseeds Holdings is expected to generate 9.84 times more return on investment than CHS. However, Australian Oilseeds is 9.84 times more volatile than CHS Inc CN. It trades about 0.05 of its potential returns per unit of risk. CHS Inc CN is currently generating about 0.03 per unit of risk. If you would invest  120.00  in Australian Oilseeds Holdings on December 29, 2024 and sell it today you would earn a total of  12.00  from holding Australian Oilseeds Holdings or generate 10.0% return on investment over 90 days.

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

Australian Oilseeds Holdings  vs.  CHS Inc CN

Australian Oilseeds

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Oilseeds Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Australian Oilseeds unveiled solid returns over the last few months and may actually be approaching a breakup point.

CHS Inc CN

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc CN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CHS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Australian Oilseeds and CHS

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

The idea behind Australian Oilseeds Holdings and CHS Inc CN 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..