Correlation Between Gratifii and Australian Dairy

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

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

Diversification Opportunities for Gratifii and Australian Dairy

0.75

Correlation Coefficient

Gratifii  Australian Dairy

Poor diversification

The 3 months correlation between Gratifii and Australian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gratifii and Australian Dairy Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dairy Farms and Gratifii 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 Gratifii are associated (or correlated) with Australian Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dairy Farms has no effect on the direction of Gratifii i.e., Gratifii and Australian Dairy go up and down completely randomly.

Pair Corralation between Gratifii and Australian Dairy

Assuming the 90 days trading horizon Gratifii is expected to generate 1.93 times more return on investment than Australian Dairy. However, Gratifii is 1.93 times more volatile than Australian Dairy Farms. It trades about 0.15 of its potential returns per unit of risk. Australian Dairy Farms is currently generating about 0.2 per unit of risk. If you would invest  5.25  in Gratifii on September 12, 2024 and sell it today you would earn a total of  5.75  from holding Gratifii or generate 109.52% return on investment over 90 days.

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

Gratifii  vs.  Australian Dairy Farms

Gratifii

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gratifii are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Gratifii unveiled solid returns over the last few months and may actually be approaching a breakup point.

Australian Dairy Farms

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Dairy Farms are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Australian Dairy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gratifii and Australian Dairy

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

The idea behind Gratifii and Australian Dairy Farms 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.