Correlation Between Aerius International and Potash America
Can any of the company-specific risk be diversified away by investing in both Aerius International and Potash America 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 Aerius International and Potash America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerius International and Potash America, you can compare the effects of market volatilities on Aerius International and Potash America 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 Aerius International with a short position of Potash America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerius International and Potash America.
Diversification Opportunities for Aerius International and Potash America
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aerius and Potash is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aerius International and Potash America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potash America and Aerius International 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 Aerius International are associated (or correlated) with Potash America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potash America has no effect on the direction of Aerius International i.e., Aerius International and Potash America go up and down completely randomly.
Pair Corralation between Aerius International and Potash America
Given the investment horizon of 90 days Aerius International is expected to generate 2.29 times less return on investment than Potash America. But when comparing it to its historical volatility, Aerius International is 3.69 times less risky than Potash America. It trades about 0.21 of its potential returns per unit of risk. Potash America is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.08 in Potash America on August 28, 2024 and sell it today you would earn a total of 0.01 from holding Potash America or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aerius International vs. Potash America
Performance |
| Timeline |
| Aerius International |
| Potash America |
Aerius International and Potash America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerius International and Potash America
The main advantage of trading using opposite Aerius International and Potash America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerius International position performs unexpectedly, Potash America 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 Potash America will offset losses from the drop in Potash America's long position.| Aerius International vs. Sack Lunch Productions | Aerius International vs. Potash America | Aerius International vs. Dalrada Financial Corp | Aerius International vs. TransUnion |
| Potash America vs. Ascendant Resources | Potash America vs. Cantex Mine Development | Potash America vs. Amarc Resources | Potash America vs. Sterling Metals Corp |
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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