Correlation Between ANZ Group and Advanced Braking

Can any of the company-specific risk be diversified away by investing in both ANZ Group and Advanced Braking 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 Advanced Braking 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 Advanced Braking Technology, you can compare the effects of market volatilities on ANZ Group and Advanced Braking 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 Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANZ Group and Advanced Braking.

Diversification Opportunities for ANZ Group and Advanced Braking

0.56

Correlation Coefficient

ANZ Group  Advanced Braking

Very weak diversification

The 3 months correlation between ANZ and Advanced is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec 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 Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of ANZ Group i.e., ANZ Group and Advanced Braking go up and down completely randomly.

Pair Corralation between ANZ Group and Advanced Braking

Assuming the 90 days trading horizon ANZ Group is expected to generate 14.59 times less return on investment than Advanced Braking. But when comparing it to its historical volatility, ANZ Group Holdings is 11.47 times less risky than Advanced Braking. It trades about 0.11 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Advanced Braking Technology on September 5, 2024 and sell it today you would earn a total of  1.70  from holding Advanced Braking Technology or generate 24.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

ANZ Group Holdings  vs.  Advanced Braking Technology

ANZ Group Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Advanced Braking Tec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANZ Group and Advanced Braking

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

The idea behind ANZ Group Holdings and Advanced Braking Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.