Correlation Between Vulcan Steel and Australian Unity

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

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

Diversification Opportunities for Vulcan Steel and Australian Unity

0.7

Correlation Coefficient

Vulcan Steel  Australian Unity

Poor diversification

The 3 months correlation between Vulcan and Australian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office and Vulcan Steel 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 Vulcan Steel are associated (or correlated) with Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Australian Unity go up and down completely randomly.

Pair Corralation between Vulcan Steel and Australian Unity

Assuming the 90 days trading horizon Vulcan Steel is expected to generate 1.11 times more return on investment than Australian Unity. However, Vulcan Steel is 1.11 times more volatile than Australian Unity Office. It trades about 0.0 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.01 per unit of risk. If you would invest  816.00  in Vulcan Steel on October 11, 2024 and sell it today you would lose (89.00) from holding Vulcan Steel or give up 10.91% of portfolio value over 90 days.

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

Vulcan Steel  vs.  Australian Unity Office

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential 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 Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Unity Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Australian Unity is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vulcan Steel and Australian Unity

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

The idea behind Vulcan Steel and Australian Unity Office 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.