Correlation Between Montauk Renewables and Australian Oilseeds

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

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

Diversification Opportunities for Montauk Renewables and Australian Oilseeds

0.23

Correlation Coefficient

Montauk Renewables  Australian Oilseeds

Modest diversification

The 3 months correlation between Montauk and Australian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Australian Oilseeds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Oilseeds and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Australian Oilseeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Oilseeds has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Australian Oilseeds go up and down completely randomly.

Pair Corralation between Montauk Renewables and Australian Oilseeds

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Australian Oilseeds. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 1.22 times less risky than Australian Oilseeds. The stock trades about -0.08 of its potential returns per unit of risk. The Australian Oilseeds Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Australian Oilseeds Holdings on December 4, 2024 and sell it today you would earn a total of  28.00  from holding Australian Oilseeds Holdings or generate 28.0% return on investment over 90 days.

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

Montauk Renewables  vs.  Australian Oilseeds Holdings

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Australian Oilseeds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Oilseeds Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Australian Oilseeds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Montauk Renewables and Australian Oilseeds

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

The idea behind Montauk Renewables and Australian Oilseeds Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.