Correlation Between CompuGroup Medical and Aeorema Communications

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

By analyzing existing cross correlation between CompuGroup Medical AG and Aeorema Communications Plc, you can compare the effects of market volatilities on CompuGroup Medical and Aeorema Communications 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 CompuGroup Medical with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompuGroup Medical and Aeorema Communications.

Diversification Opportunities for CompuGroup Medical and Aeorema Communications

0.21

Correlation Coefficient

CompuGroup Medical  Aeorema Communications

Modest diversification

The 3 months correlation between CompuGroup and Aeorema is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CompuGroup Medical AG and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and CompuGroup Medical 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 CompuGroup Medical AG are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of CompuGroup Medical i.e., CompuGroup Medical and Aeorema Communications go up and down completely randomly.

Pair Corralation between CompuGroup Medical and Aeorema Communications

Assuming the 90 days trading horizon CompuGroup Medical AG is expected to generate 1.71 times more return on investment than Aeorema Communications. However, CompuGroup Medical is 1.71 times more volatile than Aeorema Communications Plc. It trades about 0.06 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.09 per unit of risk. If you would invest  1,491  in CompuGroup Medical AG on September 3, 2024 and sell it today you would earn a total of  104.00  from holding CompuGroup Medical AG or generate 6.98% return on investment over 90 days.

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

CompuGroup Medical AG  vs.  Aeorema Communications Plc

CompuGroup Medical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CompuGroup Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CompuGroup Medical and Aeorema Communications

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

The idea behind CompuGroup Medical AG and Aeorema Communications Plc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.