Correlation Between Aba Chemicals and 360 Security

Can any of the company-specific risk be diversified away by investing in both Aba Chemicals and 360 Security 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 360 Security 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 360 Security Technology, you can compare the effects of market volatilities on Aba Chemicals and 360 Security 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 360 Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and 360 Security.

Diversification Opportunities for Aba Chemicals and 360 Security

0.24

Correlation Coefficient

Aba Chemicals  360 Security

Modest diversification

The 3 months correlation between Aba and 360 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and 360 Security Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 360 Security Technology 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 360 Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 360 Security Technology has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and 360 Security go up and down completely randomly.

Pair Corralation between Aba Chemicals and 360 Security

Assuming the 90 days trading horizon Aba Chemicals is expected to generate 8.59 times less return on investment than 360 Security. But when comparing it to its historical volatility, Aba Chemicals Corp is 1.07 times less risky than 360 Security. It trades about 0.01 of its potential returns per unit of risk. 360 Security Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  862.00  in 360 Security Technology on October 22, 2024 and sell it today you would earn a total of  153.00  from holding 360 Security Technology or generate 17.75% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  360 Security Technology

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 somewhat strong basic indicators, Aba Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

360 Security Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 360 Security Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 360 Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aba Chemicals and 360 Security

The main advantage of trading using opposite Aba Chemicals and 360 Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aba Chemicals position performs unexpectedly, 360 Security 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 360 Security will offset losses from the drop in 360 Security's long position.

The idea behind Aba Chemicals Corp and 360 Security Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.