Correlation Between AEGEAN AIRLINES and AUTO TRADER

Can any of the company-specific risk be diversified away by investing in both AEGEAN AIRLINES and AUTO TRADER 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 AEGEAN AIRLINES and AUTO TRADER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEGEAN AIRLINES and AUTO TRADER ADR, you can compare the effects of market volatilities on AEGEAN AIRLINES and AUTO TRADER 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 AEGEAN AIRLINES with a short position of AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEGEAN AIRLINES and AUTO TRADER.

Diversification Opportunities for AEGEAN AIRLINES and AUTO TRADER

0.56

Correlation Coefficient

AEGEAN AIRLINES  AUTO TRADER

Very weak diversification

The 3 months correlation between AEGEAN and AUTO is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and AUTO TRADER go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and AUTO TRADER

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 1.23 times more return on investment than AUTO TRADER. However, AEGEAN AIRLINES is 1.23 times more volatile than AUTO TRADER ADR. It trades about 0.08 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about 0.06 per unit of risk. If you would invest  533.00  in AEGEAN AIRLINES on October 10, 2024 and sell it today you would earn a total of  512.00  from holding AEGEAN AIRLINES or generate 96.06% return on investment over 90 days.

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

AEGEAN AIRLINES  vs.  AUTO TRADER ADR

AEGEAN AIRLINES

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AUTO TRADER ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AEGEAN AIRLINES and AUTO TRADER

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

The idea behind AEGEAN AIRLINES and AUTO TRADER ADR 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 Anywhere module to track or share privately all of your investments from the convenience of any device.