Correlation Between Wam Capital and Australian Foundation

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

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

Diversification Opportunities for Wam Capital and Australian Foundation

-0.05

Correlation Coefficient

Wam Capital  Australian Foundation

Good diversification

The 3 months correlation between Wam and Australian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wam Capital and Australian Foundation Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Foundation and Wam Capital 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 Wam Capital are associated (or correlated) with Australian Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Foundation has no effect on the direction of Wam Capital i.e., Wam Capital and Australian Foundation go up and down completely randomly.

Pair Corralation between Wam Capital and Australian Foundation

Assuming the 90 days trading horizon Wam Capital is expected to generate 1.95 times more return on investment than Australian Foundation. However, Wam Capital is 1.95 times more volatile than Australian Foundation Investment. It trades about 0.31 of its potential returns per unit of risk. Australian Foundation Investment is currently generating about 0.0 per unit of risk. If you would invest  159.00  in Wam Capital on November 20, 2024 and sell it today you would earn a total of  8.00  from holding Wam Capital or generate 5.03% return on investment over 90 days.

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

Wam Capital  vs.  Australian Foundation Investme

Wam Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wam Capital are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Wam Capital may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Australian Foundation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Foundation Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Australian Foundation 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 Wam Capital and Australian Foundation

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

The idea behind Wam Capital and Australian Foundation Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.