Correlation Between ANZ Group and Diversified United

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

By analyzing existing cross correlation between ANZ Group Holdings and Diversified United Investment, you can compare the effects of market volatilities on ANZ Group and Diversified United 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 ANZ Group with a short position of Diversified United. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANZ Group and Diversified United.

Diversification Opportunities for ANZ Group and Diversified United

-0.43

Correlation Coefficient

ANZ Group  Diversified United

Very good diversification

The 3 months correlation between ANZ and Diversified is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Diversified United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified United and ANZ Group 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 ANZ Group Holdings are associated (or correlated) with Diversified United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified United has no effect on the direction of ANZ Group i.e., ANZ Group and Diversified United go up and down completely randomly.

Pair Corralation between ANZ Group and Diversified United

Assuming the 90 days trading horizon ANZ Group Holdings is expected to generate 0.74 times more return on investment than Diversified United. However, ANZ Group Holdings is 1.36 times less risky than Diversified United. It trades about -0.02 of its potential returns per unit of risk. Diversified United Investment is currently generating about -0.05 per unit of risk. If you would invest  10,438  in ANZ Group Holdings on September 27, 2024 and sell it today you would lose (31.00) from holding ANZ Group Holdings or give up 0.3% of portfolio value over 90 days.

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

ANZ Group Holdings  vs.  Diversified United Investment

ANZ Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diversified United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diversified United Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Diversified United 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 ANZ Group and Diversified United

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

The idea behind ANZ Group Holdings and Diversified United 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.