Correlation Between AAR Corp and Biotage AB
Can any of the company-specific risk be diversified away by investing in both AAR Corp and Biotage AB 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 AAR Corp and Biotage AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Biotage AB, you can compare the effects of market volatilities on AAR Corp and Biotage AB 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 AAR Corp with a short position of Biotage AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Biotage AB.
Diversification Opportunities for AAR Corp and Biotage AB
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AAR and Biotage is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Biotage AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotage AB and AAR Corp 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 AAR Corp are associated (or correlated) with Biotage AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotage AB has no effect on the direction of AAR Corp i.e., AAR Corp and Biotage AB go up and down completely randomly.
Pair Corralation between AAR Corp and Biotage AB
Considering the 90-day investment horizon AAR Corp is expected to generate 0.52 times more return on investment than Biotage AB. However, AAR Corp is 1.91 times less risky than Biotage AB. It trades about 0.05 of its potential returns per unit of risk. Biotage AB is currently generating about 0.01 per unit of risk. If you would invest 4,825 in AAR Corp on January 17, 2024 and sell it today you would earn a total of 1,241 from holding AAR Corp or generate 25.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.36% |
| Values | Daily Returns |
AAR Corp vs. Biotage AB
Performance |
| Timeline |
| AAR Corp |
| Biotage AB |
AAR Corp and Biotage AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Biotage AB
The main advantage of trading using opposite AAR Corp and Biotage AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp position performs unexpectedly, Biotage AB 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 Biotage AB will offset losses from the drop in Biotage AB's long position.The idea behind AAR Corp and Biotage AB 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.| Biotage AB vs. Sunlands Technology Group | Biotage AB vs. Exceed World | Biotage AB vs. HUMANA INC | Biotage AB vs. Aquagold International |
Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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