Correlation Between Cloud Live and Aerospace

Can any of the company-specific risk be diversified away by investing in both Cloud Live and Aerospace 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 Cloud Live and Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cloud Live Technology and Aerospace Hi Tech Holding, you can compare the effects of market volatilities on Cloud Live and Aerospace 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 Cloud Live with a short position of Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cloud Live and Aerospace.

Diversification Opportunities for Cloud Live and Aerospace

0.55

Correlation Coefficient

Cloud Live  Aerospace

Very weak diversification

The 3 months correlation between Cloud and Aerospace is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Live Technology and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech and Cloud Live 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 Cloud Live Technology are associated (or correlated) with Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of Cloud Live i.e., Cloud Live and Aerospace go up and down completely randomly.

Pair Corralation between Cloud Live and Aerospace

Assuming the 90 days trading horizon Cloud Live Technology is expected to generate 2.7 times more return on investment than Aerospace. However, Cloud Live is 2.7 times more volatile than Aerospace Hi Tech Holding. It trades about 0.01 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about 0.02 per unit of risk. If you would invest  307.00  in Cloud Live Technology on December 26, 2024 and sell it today you would lose (18.00) from holding Cloud Live Technology or give up 5.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Cloud Live Technology  vs.  Aerospace Hi Tech Holding

Cloud Live Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cloud Live Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cloud Live is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aerospace Hi Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aerospace Hi Tech Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Aerospace is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cloud Live and Aerospace

The main advantage of trading using opposite Cloud Live and Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloud Live position performs unexpectedly, Aerospace 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 Aerospace will offset losses from the drop in Aerospace's long position.

The idea behind Cloud Live Technology and Aerospace Hi Tech Holding 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.