Correlation Between ABERFORTH SMCOS and AMADEUS IT

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

By analyzing existing cross correlation between ABERFORTH SMCOS TRLS 01 and AMADEUS IT GRP, you can compare the effects of market volatilities on ABERFORTH SMCOS and AMADEUS IT 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 ABERFORTH SMCOS with a short position of AMADEUS IT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABERFORTH SMCOS and AMADEUS IT.

Diversification Opportunities for ABERFORTH SMCOS and AMADEUS IT

-0.32

Correlation Coefficient

ABERFORTH SMCOS  AMADEUS IT

Very good diversification

The 3 months correlation between ABERFORTH and AMADEUS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ABERFORTH SMCOS TRLS 01 and AMADEUS IT GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMADEUS IT GRP and ABERFORTH SMCOS 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 ABERFORTH SMCOS TRLS 01 are associated (or correlated) with AMADEUS IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMADEUS IT GRP has no effect on the direction of ABERFORTH SMCOS i.e., ABERFORTH SMCOS and AMADEUS IT go up and down completely randomly.

Pair Corralation between ABERFORTH SMCOS and AMADEUS IT

Assuming the 90 days horizon ABERFORTH SMCOS TRLS 01 is expected to under-perform the AMADEUS IT. But the stock apears to be less risky and, when comparing its historical volatility, ABERFORTH SMCOS TRLS 01 is 1.22 times less risky than AMADEUS IT. The stock trades about -0.06 of its potential returns per unit of risk. The AMADEUS IT GRP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,697  in AMADEUS IT GRP on December 30, 2024 and sell it today you would earn a total of  653.00  from holding AMADEUS IT GRP or generate 9.75% return on investment over 90 days.

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

ABERFORTH SMCOS TRLS 01  vs.  AMADEUS IT GRP

ABERFORTH SMCOS TRLS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABERFORTH SMCOS TRLS 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABERFORTH SMCOS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AMADEUS IT GRP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AMADEUS IT GRP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AMADEUS IT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ABERFORTH SMCOS and AMADEUS IT

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

The idea behind ABERFORTH SMCOS TRLS 01 and AMADEUS IT GRP 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.