Correlation Between Decade Resources and Australian Strategic

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

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

Diversification Opportunities for Decade Resources and Australian Strategic

0.29

Correlation Coefficient

Decade Resources  Australian Strategic

Modest diversification

The 3 months correlation between Decade and Australian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Decade Resources and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic and Decade 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 Decade Resources are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Decade Resources i.e., Decade Resources and Australian Strategic go up and down completely randomly.

Pair Corralation between Decade Resources and Australian Strategic

Assuming the 90 days horizon Decade Resources is expected to generate 2.53 times more return on investment than Australian Strategic. However, Decade Resources is 2.53 times more volatile than Australian Strategic Materials. It trades about 0.04 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.01 per unit of risk. If you would invest  3.50  in Decade Resources on September 3, 2024 and sell it today you would lose (0.40) from holding Decade Resources or give up 11.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Decade Resources  vs.  Australian Strategic Materials

Decade Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Decade Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Decade Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Strategic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Australian Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Decade Resources and Australian Strategic

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

The idea behind Decade Resources and Australian Strategic Materials 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.