Correlation Between Aeorema Communications and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Auto Trader 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 Aeorema Communications and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and Auto Trader Group, you can compare the effects of market volatilities on Aeorema Communications and Auto Trader 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 Aeorema Communications with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Auto Trader.
Diversification Opportunities for Aeorema Communications and Auto Trader
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aeorema and Auto is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Auto Trader go up and down completely randomly.
Pair Corralation between Aeorema Communications and Auto Trader
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Auto Trader. In addition to that, Aeorema Communications is 2.02 times more volatile than Auto Trader Group. It trades about -0.42 of its total potential returns per unit of risk. Auto Trader Group is currently generating about -0.09 per unit of volatility. If you would invest 79,030 in Auto Trader Group on October 25, 2024 and sell it today you would lose (1,410) from holding Auto Trader Group or give up 1.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Auto Trader Group
Performance |
| Timeline |
| Aeorema Communications |
| Auto Trader Group |
Aeorema Communications and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Auto Trader
The main advantage of trading using opposite Aeorema Communications and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Aeorema Communications vs. Everyman Media Group | Aeorema Communications vs. G5 Entertainment AB | Aeorema Communications vs. Ecofin Global Utilities | Aeorema Communications vs. United Airlines Holdings |
| Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Toyota Motor Corp | Auto Trader vs. Reliance Industries Ltd |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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