Correlation Between Australian Agricultural and Apple

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

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

Diversification Opportunities for Australian Agricultural and Apple

0.33

Correlation Coefficient

Australian Agricultural  Apple

Weak diversification

The 3 months correlation between Australian and Apple is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Australian Agricultural 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 Australian Agricultural are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Apple go up and down completely randomly.

Pair Corralation between Australian Agricultural and Apple

Assuming the 90 days horizon Australian Agricultural is expected to generate 0.88 times more return on investment than Apple. However, Australian Agricultural is 1.13 times less risky than Apple. It trades about 0.13 of its potential returns per unit of risk. Apple Inc is currently generating about -0.04 per unit of risk. If you would invest  84.00  in Australian Agricultural on July 2, 2024 and sell it today you would earn a total of  3.00  from holding Australian Agricultural or generate 3.57% return on investment over 90 days.

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

Australian Agricultural  vs.  Apple Inc

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Australian Agricultural and Apple

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

The idea behind Australian Agricultural and Apple Inc 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.