Correlation Between Aerodrome and Petrochemical
Can any of the company-specific risk be diversified away by investing in both Aerodrome and Petrochemical 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 Aerodrome and Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerodrome Group and Petrochemical, you can compare the effects of market volatilities on Aerodrome and Petrochemical 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 Aerodrome with a short position of Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerodrome and Petrochemical.
Diversification Opportunities for Aerodrome and Petrochemical
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aerodrome and Petrochemical is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aerodrome Group and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Aerodrome 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 Aerodrome Group are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Aerodrome i.e., Aerodrome and Petrochemical go up and down completely randomly.
Pair Corralation between Aerodrome and Petrochemical
Assuming the 90 days trading horizon Aerodrome Group is expected to generate 6.79 times more return on investment than Petrochemical. However, Aerodrome is 6.79 times more volatile than Petrochemical. It trades about 0.21 of its potential returns per unit of risk. Petrochemical is currently generating about 0.08 per unit of risk. If you would invest 3,520 in Aerodrome Group on August 29, 2024 and sell it today you would earn a total of 4,080 from holding Aerodrome Group or generate 115.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aerodrome Group vs. Petrochemical
Performance |
| Timeline |
| Aerodrome Group |
| Petrochemical |
Aerodrome and Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerodrome and Petrochemical
The main advantage of trading using opposite Aerodrome and Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerodrome position performs unexpectedly, Petrochemical 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 Petrochemical will offset losses from the drop in Petrochemical's long position.| Aerodrome vs. Kvasir Education | Aerodrome vs. Opal Balance | Aerodrome vs. B Communications | Aerodrome vs. Holmes Place International |
| Petrochemical vs. Opal Balance | Petrochemical vs. B Communications | Petrochemical vs. Holmes Place International | Petrochemical vs. Nova |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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