Correlation Between Ecofibre and BetaShares Australia

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

By analyzing existing cross correlation between Ecofibre and BetaShares Australia 200, you can compare the effects of market volatilities on Ecofibre and BetaShares Australia 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 Ecofibre with a short position of BetaShares Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and BetaShares Australia.

Diversification Opportunities for Ecofibre and BetaShares Australia

-0.1

Correlation Coefficient

Ecofibre  BetaShares Australia

Good diversification

The 3 months correlation between Ecofibre and BetaShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and BetaShares Australia 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Australia 200 and Ecofibre 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 Ecofibre are associated (or correlated) with BetaShares Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Australia 200 has no effect on the direction of Ecofibre i.e., Ecofibre and BetaShares Australia go up and down completely randomly.

Pair Corralation between Ecofibre and BetaShares Australia

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the BetaShares Australia. In addition to that, Ecofibre is 8.98 times more volatile than BetaShares Australia 200. It trades about -0.04 of its total potential returns per unit of risk. BetaShares Australia 200 is currently generating about -0.06 per unit of volatility. If you would invest  14,017  in BetaShares Australia 200 on December 2, 2024 and sell it today you would lose (382.00) from holding BetaShares Australia 200 or give up 2.73% of portfolio value over 90 days.

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

Ecofibre  vs.  BetaShares Australia 200

Ecofibre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BetaShares Australia 200

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaShares Australia 200 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BetaShares Australia 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 Ecofibre and BetaShares Australia

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

The idea behind Ecofibre and BetaShares Australia 200 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.