Correlation Between Carawine Resources and Australian Foundation

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

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

Diversification Opportunities for Carawine Resources and Australian Foundation

0.25

Correlation Coefficient

Carawine Resources  Australian Foundation

Modest diversification

The 3 months correlation between Carawine and Australian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Australian Foundation Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Foundation and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Australian Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Foundation has no effect on the direction of Carawine Resources i.e., Carawine Resources and Australian Foundation go up and down completely randomly.

Pair Corralation between Carawine Resources and Australian Foundation

Assuming the 90 days trading horizon Carawine Resources Limited is expected to generate 9.05 times more return on investment than Australian Foundation. However, Carawine Resources is 9.05 times more volatile than Australian Foundation Investment. It trades about 0.05 of its potential returns per unit of risk. Australian Foundation Investment is currently generating about 0.15 per unit of risk. If you would invest  9.10  in Carawine Resources Limited on September 14, 2024 and sell it today you would earn a total of  0.60  from holding Carawine Resources Limited or generate 6.59% return on investment over 90 days.

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

Carawine Resources Limited  vs.  Australian Foundation Investme

Carawine Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Australian Foundation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Foundation Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Australian Foundation 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 Carawine Resources and Australian Foundation

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

The idea behind Carawine Resources Limited and Australian Foundation Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.