Correlation Between Aba Chemicals and Wonders Information

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

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

Diversification Opportunities for Aba Chemicals and Wonders Information

0.44

Correlation Coefficient

Aba Chemicals  Wonders Information

Very weak diversification

The 3 months correlation between Aba and Wonders is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Wonders Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonders Information and Aba Chemicals 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 Aba Chemicals Corp are associated (or correlated) with Wonders Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonders Information has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Wonders Information go up and down completely randomly.

Pair Corralation between Aba Chemicals and Wonders Information

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to generate 0.62 times more return on investment than Wonders Information. However, Aba Chemicals Corp is 1.62 times less risky than Wonders Information. It trades about 0.06 of its potential returns per unit of risk. Wonders Information is currently generating about 0.03 per unit of risk. If you would invest  714.00  in Aba Chemicals Corp on December 26, 2024 and sell it today you would earn a total of  49.00  from holding Aba Chemicals Corp or generate 6.86% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  Wonders Information

Aba Chemicals Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aba Chemicals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aba Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Wonders Information

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wonders Information are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wonders Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aba Chemicals and Wonders Information

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

The idea behind Aba Chemicals Corp and Wonders Information 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.