Correlation Between Australian Agricultural and VOXX International

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

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

Diversification Opportunities for Australian Agricultural and VOXX International

-0.52

Correlation Coefficient

Australian Agricultural  VOXX International

Excellent diversification

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

Pair Corralation between Australian Agricultural and VOXX International

Assuming the 90 days horizon Australian Agricultural is expected to generate 39.86 times less return on investment than VOXX International. But when comparing it to its historical volatility, Australian Agricultural is 2.88 times less risky than VOXX International. It trades about 0.0 of its potential returns per unit of risk. VOXX International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  710.00  in VOXX International on September 28, 2024 and sell it today you would earn a total of  20.00  from holding VOXX International or generate 2.82% return on investment over 90 days.

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

Australian Agricultural  vs.  VOXX International

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.

VOXX International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VOXX International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VOXX International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Agricultural and VOXX International

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

The idea behind Australian Agricultural and VOXX International 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.