Correlation Between Australian Strategic and Austco Healthcare

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

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

Diversification Opportunities for Australian Strategic and Austco Healthcare

-0.17

Correlation Coefficient

Australian Strategic  Austco Healthcare

Good diversification

The 3 months correlation between Australian and Austco is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Austco Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austco Healthcare and Australian Strategic 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 Strategic Materials are associated (or correlated) with Austco Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austco Healthcare has no effect on the direction of Australian Strategic i.e., Australian Strategic and Austco Healthcare go up and down completely randomly.

Pair Corralation between Australian Strategic and Austco Healthcare

Assuming the 90 days trading horizon Australian Strategic is expected to generate 3.47 times less return on investment than Austco Healthcare. In addition to that, Australian Strategic is 1.86 times more volatile than Austco Healthcare. It trades about 0.04 of its total potential returns per unit of risk. Austco Healthcare is currently generating about 0.29 per unit of volatility. If you would invest  25.00  in Austco Healthcare on September 25, 2024 and sell it today you would earn a total of  3.00  from holding Austco Healthcare or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Australian Strategic Materials  vs.  Austco Healthcare

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Austco Healthcare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Australian Strategic and Austco Healthcare

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

The idea behind Australian Strategic Materials and Austco Healthcare 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.