Correlation Between Australian Agricultural and China Railway

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

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

Diversification Opportunities for Australian Agricultural and China Railway

-0.13

Correlation Coefficient

Australian Agricultural  China Railway

Good diversification

The 3 months correlation between Australian and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and China Railway go up and down completely randomly.

Pair Corralation between Australian Agricultural and China Railway

Assuming the 90 days horizon Australian Agricultural is expected to generate 1.81 times less return on investment than China Railway. In addition to that, Australian Agricultural is 2.27 times more volatile than China Railway Construction. It trades about 0.03 of its total potential returns per unit of risk. China Railway Construction is currently generating about 0.13 per unit of volatility. If you would invest  60.00  in China Railway Construction on April 20, 2025 and sell it today you would earn a total of  4.00  from holding China Railway Construction or generate 6.67% return on investment over 90 days.

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

Australian Agricultural  vs.  China Railway Construction

Australian Agricultural

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

China Railway Constr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Australian Agricultural and China Railway

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

The idea behind Australian Agricultural and China Railway Construction 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..