Correlation Between Aerospace Industrial and Topkey Corp

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

By analyzing existing cross correlation between Aerospace Industrial Development and Topkey Corp, you can compare the effects of market volatilities on Aerospace Industrial and Topkey Corp 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 Aerospace Industrial with a short position of Topkey Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerospace Industrial and Topkey Corp.

Diversification Opportunities for Aerospace Industrial and Topkey Corp

0.64

Correlation Coefficient

Aerospace Industrial  Topkey Corp

Poor diversification

The 3 months correlation between Aerospace and Topkey is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and Topkey Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topkey Corp and Aerospace Industrial 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 Aerospace Industrial Development are associated (or correlated) with Topkey Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topkey Corp has no effect on the direction of Aerospace Industrial i.e., Aerospace Industrial and Topkey Corp go up and down completely randomly.

Pair Corralation between Aerospace Industrial and Topkey Corp

Assuming the 90 days trading horizon Aerospace Industrial Development is expected to under-perform the Topkey Corp. In addition to that, Aerospace Industrial is 1.06 times more volatile than Topkey Corp. It trades about -0.19 of its total potential returns per unit of risk. Topkey Corp is currently generating about -0.06 per unit of volatility. If you would invest  20,000  in Topkey Corp on September 23, 2024 and sell it today you would lose (300.00) from holding Topkey Corp or give up 1.5% of portfolio value over 90 days.

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

Aerospace Industrial Developme  vs.  Topkey Corp

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Industrial Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Topkey Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topkey Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Aerospace Industrial and Topkey Corp

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

The idea behind Aerospace Industrial Development and Topkey Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.