Correlation Between FOS Capital and Australian Dairy

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

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

Diversification Opportunities for FOS Capital and Australian Dairy

-0.15

Correlation Coefficient

FOS Capital  Australian Dairy

Good diversification

The 3 months correlation between FOS and Australian is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding FOS Capital and Australian Dairy Nutritionals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dairy Nut and FOS Capital 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 FOS Capital are associated (or correlated) with Australian Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dairy Nut has no effect on the direction of FOS Capital i.e., FOS Capital and Australian Dairy go up and down completely randomly.

Pair Corralation between FOS Capital and Australian Dairy

Assuming the 90 days trading horizon FOS Capital is expected to generate 0.7 times more return on investment than Australian Dairy. However, FOS Capital is 1.42 times less risky than Australian Dairy. It trades about 0.03 of its potential returns per unit of risk. Australian Dairy Nutritionals is currently generating about 0.02 per unit of risk. If you would invest  31.00  in FOS Capital on April 20, 2025 and sell it today you would earn a total of  1.00  from holding FOS Capital or generate 3.23% return on investment over 90 days.

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

FOS Capital  vs.  Australian Dairy Nutritionals

FOS Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FOS Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FOS Capital may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Australian Dairy Nut

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Dairy Nutritionals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Australian Dairy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FOS Capital and Australian Dairy

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

The idea behind FOS Capital and Australian Dairy Nutritionals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.