Correlation Between Great Ajax and Associated Capital

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

By analyzing existing cross correlation between Great Ajax Corp and Associated Capital Group, you can compare the effects of market volatilities on Great Ajax and Associated Capital 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 Great Ajax with a short position of Associated Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Ajax and Associated Capital.

Diversification Opportunities for Great Ajax and Associated Capital

0.6

Correlation Coefficient

Great Ajax  Associated Capital

Poor diversification

The 3 months correlation between Great and Associated is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Great Ajax Corp and Associated Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Capital and Great Ajax 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 Great Ajax Corp are associated (or correlated) with Associated Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Capital has no effect on the direction of Great Ajax i.e., Great Ajax and Associated Capital go up and down completely randomly.

Pair Corralation between Great Ajax and Associated Capital

Considering the 90-day investment horizon Great Ajax Corp is expected to under-perform the Associated Capital. In addition to that, Great Ajax is 2.54 times more volatile than Associated Capital Group. It trades about -0.08 of its total potential returns per unit of risk. Associated Capital Group is currently generating about -0.16 per unit of volatility. If you would invest  3,377  in Associated Capital Group on January 20, 2024 and sell it today you would lose (124.00) from holding Associated Capital Group or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Great Ajax Corp  vs.  Associated Capital Group

Great Ajax Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Ajax Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Associated Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Great Ajax and Associated Capital

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

The idea behind Great Ajax Corp and Associated Capital Group 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.