Correlation Between Aerodrome and Overseas Commerce

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

By analyzing existing cross correlation between Aerodrome Group and Overseas Commerce, you can compare the effects of market volatilities on Aerodrome and Overseas Commerce 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 Overseas Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerodrome and Overseas Commerce.

Diversification Opportunities for Aerodrome and Overseas Commerce

0.32

Correlation Coefficient

Aerodrome  Overseas Commerce

Weak diversification

The 3 months correlation between Aerodrome and Overseas is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aerodrome Group and Overseas Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Commerce 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 Overseas Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Commerce has no effect on the direction of Aerodrome i.e., Aerodrome and Overseas Commerce go up and down completely randomly.

Pair Corralation between Aerodrome and Overseas Commerce

Assuming the 90 days trading horizon Aerodrome Group is expected to generate 2.58 times more return on investment than Overseas Commerce. However, Aerodrome is 2.58 times more volatile than Overseas Commerce. It trades about 0.09 of its potential returns per unit of risk. Overseas Commerce is currently generating about -0.02 per unit of risk. If you would invest  4,610  in Aerodrome Group on February 23, 2024 and sell it today you would earn a total of  6,750  from holding Aerodrome Group or generate 146.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aerodrome Group  vs.  Overseas Commerce

Aerodrome Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Overseas Commerce

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Commerce are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Overseas Commerce is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aerodrome and Overseas Commerce

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

The idea behind Aerodrome Group and Overseas Commerce 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.