Correlation Between Energy Transfer and Australian Agricultural

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

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

Diversification Opportunities for Energy Transfer and Australian Agricultural

-0.3

Correlation Coefficient

Energy Transfer  Australian Agricultural

Very good diversification

The 3 months correlation between Energy and Australian is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Energy Transfer 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 Energy Transfer LP are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Energy Transfer i.e., Energy Transfer and Australian Agricultural go up and down completely randomly.

Pair Corralation between Energy Transfer and Australian Agricultural

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 35.12 times less return on investment than Australian Agricultural. But when comparing it to its historical volatility, Energy Transfer LP is 1.33 times less risky than Australian Agricultural. It trades about 0.0 of its potential returns per unit of risk. Australian Agricultural is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Australian Agricultural on December 23, 2024 and sell it today you would earn a total of  5.00  from holding Australian Agricultural or generate 5.56% return on investment over 90 days.

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

Energy Transfer LP  vs.  Australian Agricultural

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

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

Australian Agricultural

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Energy Transfer and Australian Agricultural

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

The idea behind Energy Transfer LP and Australian 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.

Check out your portfolio center.

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.