Correlation Between Dairy Farm and AUST AGRICULTURAL

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

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

Diversification Opportunities for Dairy Farm and AUST AGRICULTURAL

-0.12

Correlation Coefficient

Dairy Farm  AUST AGRICULTURAL

Good diversification

The 3 months correlation between Dairy and AUST is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL and Dairy Farm 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 Dairy Farm International are associated (or correlated) with AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of Dairy Farm i.e., Dairy Farm and AUST AGRICULTURAL go up and down completely randomly.

Pair Corralation between Dairy Farm and AUST AGRICULTURAL

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the AUST AGRICULTURAL. In addition to that, Dairy Farm is 1.8 times more volatile than AUST AGRICULTURAL. It trades about -0.08 of its total potential returns per unit of risk. AUST AGRICULTURAL is currently generating about 0.09 per unit of volatility. If you would invest  83.00  in AUST AGRICULTURAL on December 2, 2024 and sell it today you would earn a total of  5.00  from holding AUST AGRICULTURAL or generate 6.02% return on investment over 90 days.

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

Dairy Farm International  vs.  AUST AGRICULTURAL

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AUST AGRICULTURAL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUST AGRICULTURAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AUST AGRICULTURAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dairy Farm and AUST AGRICULTURAL

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

The idea behind Dairy Farm International and AUST 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.