Correlation Between AECI and Trencor
Can any of the company-specific risk be diversified away by investing in both AECI and Trencor 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 AECI and Trencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AECI and Trencor, you can compare the effects of market volatilities on AECI and Trencor 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 AECI with a short position of Trencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of AECI and Trencor.
Diversification Opportunities for AECI and Trencor
Pay attention - limited upside
The 3 months correlation between AECI and Trencor is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding AECI and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor and AECI 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 AECI are associated (or correlated) with Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of AECI i.e., AECI and Trencor go up and down completely randomly.
Pair Corralation between AECI and Trencor
Assuming the 90 days trading horizon AECI is expected to under-perform the Trencor. In addition to that, AECI is 1.27 times more volatile than Trencor. It trades about -0.11 of its total potential returns per unit of risk. Trencor is currently generating about 0.08 per unit of volatility. If you would invest 79,700 in Trencor on November 2, 2024 and sell it today you would earn a total of 1,400 from holding Trencor or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
AECI vs. Trencor
Performance |
| Timeline |
| AECI |
| Trencor |
AECI and Trencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AECI and Trencor
The main advantage of trading using opposite AECI and Trencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AECI position performs unexpectedly, Trencor 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 Trencor will offset losses from the drop in Trencor's long position.The idea behind AECI and Trencor 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.| Trencor vs. Advtech | Trencor vs. Mantengu Mining | Trencor vs. Kumba Iron Ore | Trencor vs. Hosken Consolidated Investments |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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