Correlation Between Aerodrome and International Business
Can any of the company-specific risk be diversified away by investing in both Aerodrome and International Business 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 Aerodrome and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerodrome Group and International Business Machines, you can compare the effects of market volatilities on Aerodrome and International Business 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 Aerodrome with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerodrome and International Business.
Diversification Opportunities for Aerodrome and International Business
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aerodrome and International is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aerodrome Group and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Aerodrome 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 Aerodrome Group are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Aerodrome i.e., Aerodrome and International Business go up and down completely randomly.
Pair Corralation between Aerodrome and International Business
Assuming the 90 days trading horizon Aerodrome Group is expected to generate 5.88 times more return on investment than International Business. However, Aerodrome is 5.88 times more volatile than International Business Machines. It trades about 0.16 of its potential returns per unit of risk. International Business Machines is currently generating about -0.34 per unit of risk. If you would invest 7,600 in Aerodrome Group on January 20, 2024 and sell it today you would earn a total of 1,070 from holding Aerodrome Group or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Aerodrome Group vs. International Business Machine
Performance |
| Timeline |
| Aerodrome Group |
| International Business |
Aerodrome and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerodrome and International Business
The main advantage of trading using opposite Aerodrome and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerodrome position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Aerodrome vs. EN Shoham Business | Aerodrome vs. Accel Solutions Group | Aerodrome vs. SR Accord | Aerodrome vs. Rapac Communication Infrastructure |
| International Business vs. Information Services Group | International Business vs. Home Bancorp | International Business vs. CRA International | International Business 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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