Correlation Between Potash America and Aerius International
Can any of the company-specific risk be diversified away by investing in both Potash America and Aerius International 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 Potash America and Aerius International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potash America and Aerius International, you can compare the effects of market volatilities on Potash America and Aerius International 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 Potash America with a short position of Aerius International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potash America and Aerius International.
Diversification Opportunities for Potash America and Aerius International
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Potash and Aerius is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Potash America and Aerius International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerius International and Potash America 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 Potash America are associated (or correlated) with Aerius International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerius International has no effect on the direction of Potash America i.e., Potash America and Aerius International go up and down completely randomly.
Pair Corralation between Potash America and Aerius International
Given the investment horizon of 90 days Potash America is expected to generate 2.25 times more return on investment than Aerius International. However, Potash America is 2.25 times more volatile than Aerius International. It trades about 0.2 of its potential returns per unit of risk. Aerius International is currently generating about 0.07 per unit of risk. If you would invest 0.06 in Potash America on November 3, 2024 and sell it today you would earn a total of 0.03 from holding Potash America or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Potash America vs. Aerius International
Performance |
| Timeline |
| Potash America |
| Aerius International |
Potash America and Aerius International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potash America and Aerius International
The main advantage of trading using opposite Potash America and Aerius International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potash America position performs unexpectedly, Aerius International 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 Aerius International will offset losses from the drop in Aerius International's long position.| Potash America vs. Daniels Corporate Advisory | Potash America vs. AimRite Holdings Corp | Potash America vs. Sack Lunch Productions | Potash America vs. Legends Business Grp |
| Aerius International vs. Sack Lunch Productions | Aerius International vs. Potash America | Aerius International vs. Blue Diamond Ventures | Aerius International vs. Daniels Corporate Advisory |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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