Correlation Between WOLTERS KLUWER and AUSTRALASIAN METALS

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

By analyzing existing cross correlation between WOLTERS KLUWER ADR and AUSTRALASIAN METALS LTD, you can compare the effects of market volatilities on WOLTERS KLUWER and AUSTRALASIAN METALS 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 WOLTERS KLUWER with a short position of AUSTRALASIAN METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOLTERS KLUWER and AUSTRALASIAN METALS.

Diversification Opportunities for WOLTERS KLUWER and AUSTRALASIAN METALS

-0.25

Correlation Coefficient

WOLTERS KLUWER  AUSTRALASIAN METALS

Very good diversification

The 3 months correlation between WOLTERS and AUSTRALASIAN is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding WOLTERS KLUWER ADR and AUSTRALASIAN METALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUSTRALASIAN METALS LTD and WOLTERS KLUWER 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 WOLTERS KLUWER ADR are associated (or correlated) with AUSTRALASIAN METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUSTRALASIAN METALS LTD has no effect on the direction of WOLTERS KLUWER i.e., WOLTERS KLUWER and AUSTRALASIAN METALS go up and down completely randomly.

Pair Corralation between WOLTERS KLUWER and AUSTRALASIAN METALS

Assuming the 90 days horizon WOLTERS KLUWER ADR is expected to under-perform the AUSTRALASIAN METALS. But the stock apears to be less risky and, when comparing its historical volatility, WOLTERS KLUWER ADR is 2.52 times less risky than AUSTRALASIAN METALS. The stock trades about -0.08 of its potential returns per unit of risk. The AUSTRALASIAN METALS LTD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.60  in AUSTRALASIAN METALS LTD on December 25, 2024 and sell it today you would earn a total of  0.30  from holding AUSTRALASIAN METALS LTD or generate 8.33% return on investment over 90 days.

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

WOLTERS KLUWER ADR  vs.  AUSTRALASIAN METALS LTD

WOLTERS KLUWER ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days WOLTERS KLUWER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AUSTRALASIAN METALS LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AUSTRALASIAN METALS LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AUSTRALASIAN METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WOLTERS KLUWER and AUSTRALASIAN METALS

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

The idea behind WOLTERS KLUWER ADR and AUSTRALASIAN METALS LTD 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.