Correlation Between AAP and Airgain
Can any of the company-specific risk be diversified away by investing in both AAP and Airgain 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 AAP and Airgain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAP Inc and Airgain, you can compare the effects of market volatilities on AAP and Airgain 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 AAP with a short position of Airgain. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and Airgain.
Diversification Opportunities for AAP and Airgain
Very good diversification
The 3 months correlation between AAP and Airgain is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Airgain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airgain and AAP 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 AAP Inc are associated (or correlated) with Airgain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airgain has no effect on the direction of AAP i.e., AAP and Airgain go up and down completely randomly.
Pair Corralation between AAP and Airgain
Given the investment horizon of 90 days AAP Inc is not expected to generate positive returns. Moreover, AAP is 6.3 times more volatile than Airgain. It trades away all of its potential returns to assume current level of volatility. Airgain is currently generating about -0.09 per unit of risk. If you would invest 0.03 in AAP Inc on August 30, 2024 and sell it today you would lose (0.01) from holding AAP Inc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
AAP Inc vs. Airgain
Performance |
| Timeline |
| AAP Inc |
| Airgain |
AAP and Airgain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAP and Airgain
The main advantage of trading using opposite AAP and Airgain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAP position performs unexpectedly, Airgain 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 Airgain will offset losses from the drop in Airgain's long position.The idea behind AAP Inc and Airgain 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.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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