Correlation Between Aba Chemicals and Cultural Investment

Can any of the company-specific risk be diversified away by investing in both Aba Chemicals and Cultural Investment 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 Cultural Investment 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 Cultural Investment Holdings, you can compare the effects of market volatilities on Aba Chemicals and Cultural Investment 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 Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and Cultural Investment.

Diversification Opportunities for Aba Chemicals and Cultural Investment

0.43

Correlation Coefficient

Aba Chemicals  Cultural Investment

Very weak diversification

The 3 months correlation between Aba and Cultural is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment 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 Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Cultural Investment go up and down completely randomly.

Pair Corralation between Aba Chemicals and Cultural Investment

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to under-perform the Cultural Investment. In addition to that, Aba Chemicals is 1.4 times more volatile than Cultural Investment Holdings. It trades about -0.03 of its total potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.06 per unit of volatility. If you would invest  198.00  in Cultural Investment Holdings on October 5, 2024 and sell it today you would earn a total of  20.00  from holding Cultural Investment Holdings or generate 10.1% 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.  Cultural Investment Holdings

Aba Chemicals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aba Chemicals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cultural Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aba Chemicals and Cultural Investment

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

The idea behind Aba Chemicals Corp and Cultural Investment Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.