Correlation Between Dexus Convenience and Aussie Broadband

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

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

Diversification Opportunities for Dexus Convenience and Aussie Broadband

0.4

Correlation Coefficient

Dexus Convenience  Aussie Broadband

Very weak diversification

The 3 months correlation between Dexus and Aussie is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dexus Convenience Retail and Aussie Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aussie Broadband and Dexus Convenience 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 Dexus Convenience Retail are associated (or correlated) with Aussie Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aussie Broadband has no effect on the direction of Dexus Convenience i.e., Dexus Convenience and Aussie Broadband go up and down completely randomly.

Pair Corralation between Dexus Convenience and Aussie Broadband

Assuming the 90 days trading horizon Dexus Convenience Retail is expected to under-perform the Aussie Broadband. But the stock apears to be less risky and, when comparing its historical volatility, Dexus Convenience Retail is 1.86 times less risky than Aussie Broadband. The stock trades about -0.04 of its potential returns per unit of risk. The Aussie Broadband is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  373.00  in Aussie Broadband on September 16, 2024 and sell it today you would lose (3.00) from holding Aussie Broadband or give up 0.8% of portfolio value over 90 days.

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

Dexus Convenience Retail  vs.  Aussie Broadband

Dexus Convenience Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexus Convenience Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Dexus Convenience is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aussie Broadband

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aussie Broadband has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Aussie Broadband is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dexus Convenience and Aussie Broadband

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

The idea behind Dexus Convenience Retail and Aussie Broadband 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.