Correlation Between Computershare and Australian Agricultural

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

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

Diversification Opportunities for Computershare and Australian Agricultural

-0.58

Correlation Coefficient

Computershare  Australian Agricultural

Excellent diversification

The 3 months correlation between Computershare and Australian is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Computershare 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 Computershare 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 Computershare i.e., Computershare and Australian Agricultural go up and down completely randomly.

Pair Corralation between Computershare and Australian Agricultural

Assuming the 90 days trading horizon Computershare is expected to generate 1.65 times more return on investment than Australian Agricultural. However, Computershare is 1.65 times more volatile than Australian Agricultural. It trades about 0.16 of its potential returns per unit of risk. Australian Agricultural is currently generating about 0.14 per unit of risk. If you would invest  3,211  in Computershare on September 26, 2024 and sell it today you would earn a total of  172.00  from holding Computershare or generate 5.36% return on investment over 90 days.

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

Computershare  vs.  Australian Agricultural

Computershare

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled 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. In spite of comparatively stable fundamental indicators, Australian Agricultural 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 Computershare and Australian Agricultural

The main advantage of trading using opposite Computershare and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computershare 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 Computershare 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.