Correlation Between Aeorema Communications and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Virgin Wines 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 Virgin Wines 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 Virgin Wines UK, you can compare the effects of market volatilities on Aeorema Communications and Virgin Wines 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 Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Virgin Wines.
Diversification Opportunities for Aeorema Communications and Virgin Wines
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aeorema and Virgin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Virgin Wines go up and down completely randomly.
Pair Corralation between Aeorema Communications and Virgin Wines
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 2.79 times more return on investment than Virgin Wines. However, Aeorema Communications is 2.79 times more volatile than Virgin Wines UK. It trades about 0.18 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.12 per unit of risk. If you would invest 5,150 in Aeorema Communications Plc on September 1, 2024 and sell it today you would earn a total of 300.00 from holding Aeorema Communications Plc or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Virgin Wines UK
Performance |
| Timeline |
| Aeorema Communications |
| Virgin Wines UK |
Aeorema Communications and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Virgin Wines
The main advantage of trading using opposite Aeorema Communications and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' 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 |
| Virgin Wines vs. GreenX Metals | Virgin Wines vs. Batm Advanced Communications | Virgin Wines vs. SBM Offshore NV | Virgin Wines 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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