Correlation Between Automobile and Aloys
Can any of the company-specific risk be diversified away by investing in both Automobile and Aloys 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 Automobile and Aloys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Aloys Inc, you can compare the effects of market volatilities on Automobile and Aloys 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 Automobile with a short position of Aloys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Aloys.
Diversification Opportunities for Automobile and Aloys
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Automobile and Aloys is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Aloys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aloys Inc and Automobile 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 Automobile Pc are associated (or correlated) with Aloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aloys Inc has no effect on the direction of Automobile i.e., Automobile and Aloys go up and down completely randomly.
Pair Corralation between Automobile and Aloys
Assuming the 90 days trading horizon Automobile Pc is expected to generate 0.86 times more return on investment than Aloys. However, Automobile Pc is 1.17 times less risky than Aloys. It trades about -0.06 of its potential returns per unit of risk. Aloys Inc is currently generating about -0.09 per unit of risk. If you would invest 80,000 in Automobile Pc on September 3, 2024 and sell it today you would lose (12,000) from holding Automobile Pc or give up 15.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. Aloys Inc
Performance |
| Timeline |
| Automobile Pc |
| Aloys Inc |
Automobile and Aloys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and Aloys
The main advantage of trading using opposite Automobile and Aloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile position performs unexpectedly, Aloys 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 Aloys will offset losses from the drop in Aloys' long position.| Automobile vs. Korea Real Estate | Automobile vs. Busan Industrial Co | Automobile vs. UNISEM Co | Automobile vs. RPBio Inc |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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