Correlation Between Clime Investment and Australian Potash

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

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

Diversification Opportunities for Clime Investment and Australian Potash

0.02

Correlation Coefficient

Clime Investment  Australian Potash

Significant diversification

The 3 months correlation between Clime and Australian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and Australian Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Potash and Clime Investment 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 Clime Investment Management are associated (or correlated) with Australian Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Potash has no effect on the direction of Clime Investment i.e., Clime Investment and Australian Potash go up and down completely randomly.

Pair Corralation between Clime Investment and Australian Potash

Assuming the 90 days trading horizon Clime Investment Management is expected to generate 0.08 times more return on investment than Australian Potash. However, Clime Investment Management is 13.24 times less risky than Australian Potash. It trades about 0.07 of its potential returns per unit of risk. Australian Potash is currently generating about -0.05 per unit of risk. If you would invest  35.00  in Clime Investment Management on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Clime Investment Management or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Clime Investment Management  vs.  Australian Potash

Clime Investment Man

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clime Investment Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Clime Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Australian Potash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Potash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Clime Investment and Australian Potash

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

The idea behind Clime Investment Management and Australian Potash 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.