Correlation Between Ecofibre and Australian Bond

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

By analyzing existing cross correlation between Ecofibre and Australian Bond Exchange, you can compare the effects of market volatilities on Ecofibre and Australian Bond 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 Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and Australian Bond.

Diversification Opportunities for Ecofibre and Australian Bond

0.04

Correlation Coefficient

Ecofibre  Australian Bond

Significant diversification

The 3 months correlation between Ecofibre and Australian is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange 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 Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of Ecofibre i.e., Ecofibre and Australian Bond go up and down completely randomly.

Pair Corralation between Ecofibre and Australian Bond

Assuming the 90 days trading horizon Ecofibre is expected to generate 0.95 times more return on investment than Australian Bond. However, Ecofibre is 1.05 times less risky than Australian Bond. It trades about 0.11 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about -0.31 per unit of risk. If you would invest  2.80  in Ecofibre on October 21, 2024 and sell it today you would earn a total of  0.30  from holding Ecofibre or generate 10.71% return on investment over 90 days.

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

Ecofibre  vs.  Australian Bond Exchange

Ecofibre

Risk-Adjusted Performance

0 of 100

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Australian Bond Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Bond Exchange 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ecofibre and Australian Bond

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

The idea behind Ecofibre and Australian Bond Exchange 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.