Correlation Between Australian Agricultural and EMBARK EDUCATION

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

By analyzing existing cross correlation between Australian Agricultural and EMBARK EDUCATION LTD, you can compare the effects of market volatilities on Australian Agricultural and EMBARK EDUCATION 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 EMBARK EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and EMBARK EDUCATION.

Diversification Opportunities for Australian Agricultural and EMBARK EDUCATION

-0.52

Correlation Coefficient

Australian Agricultural  EMBARK EDUCATION

Excellent diversification

The 3 months correlation between Australian and EMBARK is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD 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 EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and EMBARK EDUCATION go up and down completely randomly.

Pair Corralation between Australian Agricultural and EMBARK EDUCATION

Assuming the 90 days horizon Australian Agricultural is expected to under-perform the EMBARK EDUCATION. In addition to that, Australian Agricultural is 1.39 times more volatile than EMBARK EDUCATION LTD. It trades about -0.03 of its total potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.05 per unit of volatility. If you would invest  23.00  in EMBARK EDUCATION LTD on September 30, 2024 and sell it today you would earn a total of  8.00  from holding EMBARK EDUCATION LTD or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Australian Agricultural  vs.  EMBARK EDUCATION LTD

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.

EMBARK EDUCATION LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Australian Agricultural and EMBARK EDUCATION

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

The idea behind Australian Agricultural and EMBARK EDUCATION 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.