Correlation Between Itech Minerals and Australian Dairy

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

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

Diversification Opportunities for Itech Minerals and Australian Dairy

0.77

Correlation Coefficient

Itech Minerals  Australian Dairy

Poor diversification

The 3 months correlation between Itech and Australian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Itech Minerals 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 Itech Minerals 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 Itech Minerals 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 Itech Minerals i.e., Itech Minerals and Australian Dairy go up and down completely randomly.

Pair Corralation between Itech Minerals and Australian Dairy

Assuming the 90 days trading horizon Itech Minerals is expected to generate 0.72 times more return on investment than Australian Dairy. However, Itech Minerals is 1.38 times less risky than Australian Dairy. It trades about -0.02 of its potential returns per unit of risk. Australian Dairy Farms is currently generating about -0.07 per unit of risk. If you would invest  5.10  in Itech Minerals on December 30, 2024 and sell it today you would lose (0.60) from holding Itech Minerals or give up 11.76% of portfolio value over 90 days.

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

Itech Minerals  vs.  Australian Dairy Farms

Itech Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Itech Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Australian Dairy Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Australian Dairy Farms 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.

Pair Trading with Itech Minerals and Australian Dairy

The main advantage of trading using opposite Itech Minerals and Australian Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itech Minerals 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 Itech Minerals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.