Correlation Between Aeorema Communications and Next PLC
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Next PLC 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 Next PLC 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 Next PLC, you can compare the effects of market volatilities on Aeorema Communications and Next PLC 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 Next PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Next PLC.
Diversification Opportunities for Aeorema Communications and Next PLC
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aeorema and Next is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Next PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next PLC 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 Next PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next PLC has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Next PLC go up and down completely randomly.
Pair Corralation between Aeorema Communications and Next PLC
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Next PLC. In addition to that, Aeorema Communications is 1.92 times more volatile than Next PLC. It trades about -0.02 of its total potential returns per unit of risk. Next PLC is currently generating about 0.11 per unit of volatility. If you would invest 667,750 in Next PLC on August 25, 2024 and sell it today you would earn a total of 308,650 from holding Next PLC or generate 46.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Next PLC
Performance |
| Timeline |
| Aeorema Communications |
| Next PLC |
Aeorema Communications and Next PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Next PLC
The main advantage of trading using opposite Aeorema Communications and Next PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Next PLC 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 Next PLC will offset losses from the drop in Next PLC's long position.| Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Hyundai Motor | Aeorema Communications vs. Toyota Motor Corp |
| Next PLC vs. Aeorema Communications Plc | Next PLC vs. Games Workshop Group | Next PLC vs. Gamma Communications PLC | Next PLC vs. Zoom Video Communications |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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