Correlation Between Caledonia Investments and Amedeo Air
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and Amedeo Air 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 Caledonia Investments and Amedeo Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Amedeo Air Four, you can compare the effects of market volatilities on Caledonia Investments and Amedeo Air 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 Caledonia Investments with a short position of Amedeo Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Amedeo Air.
Diversification Opportunities for Caledonia Investments and Amedeo Air
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caledonia and Amedeo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Amedeo Air Four in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedeo Air Four and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with Amedeo Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedeo Air Four has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and Amedeo Air go up and down completely randomly.
Pair Corralation between Caledonia Investments and Amedeo Air
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 1.75 times less return on investment than Amedeo Air. But when comparing it to its historical volatility, Caledonia Investments is 6.34 times less risky than Amedeo Air. It trades about 0.48 of its potential returns per unit of risk. Amedeo Air Four is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 5,510 in Amedeo Air Four on November 3, 2024 and sell it today you would earn a total of 760.00 from holding Amedeo Air Four or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. Amedeo Air Four
Performance |
| Timeline |
| Caledonia Investments |
| Amedeo Air Four |
Caledonia Investments and Amedeo Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Amedeo Air
The main advantage of trading using opposite Caledonia Investments and Amedeo Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, Amedeo Air 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 Amedeo Air will offset losses from the drop in Amedeo Air's long position.The idea behind Caledonia Investments and Amedeo Air Four 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.
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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 Stocks Directory module to find actively traded stocks across global markets.
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