Correlation Between Aeorema Communications and Guaranty Trust
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Guaranty Trust 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 Guaranty Trust 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 Guaranty Trust Holding, you can compare the effects of market volatilities on Aeorema Communications and Guaranty Trust 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 Guaranty Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Guaranty Trust.
Diversification Opportunities for Aeorema Communications and Guaranty Trust
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aeorema and Guaranty is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Guaranty Trust go up and down completely randomly.
Pair Corralation between Aeorema Communications and Guaranty Trust
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Guaranty Trust. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 3.04 times less risky than Guaranty Trust. The stock trades about -0.27 of its potential returns per unit of risk. The Guaranty Trust Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 190.00 in Guaranty Trust Holding on November 30, 2024 and sell it today you would earn a total of 10.00 from holding Guaranty Trust Holding or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Guaranty Trust Holding
Performance |
| Timeline |
| Aeorema Communications |
| Guaranty Trust Holding |
Aeorema Communications and Guaranty Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Guaranty Trust
The main advantage of trading using opposite Aeorema Communications and Guaranty Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Guaranty Trust 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 Guaranty Trust will offset losses from the drop in Guaranty Trust's long position.The idea behind Aeorema Communications Plc and Guaranty Trust Holding 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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