Correlation Between Haier Smart and Afentra PLC

Can any of the company-specific risk be diversified away by investing in both Haier Smart and Afentra PLC 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 Haier Smart and Afentra PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haier Smart Home and Afentra PLC, you can compare the effects of market volatilities on Haier Smart and Afentra PLC 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 Haier Smart with a short position of Afentra PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and Afentra PLC.

Diversification Opportunities for Haier Smart and Afentra PLC

0.33

Correlation Coefficient

Haier Smart  Afentra PLC

Weak diversification

The 3 months correlation between Haier and Afentra is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and Afentra PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afentra PLC and Haier Smart 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 Haier Smart Home are associated (or correlated) with Afentra PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afentra PLC has no effect on the direction of Haier Smart i.e., Haier Smart and Afentra PLC go up and down completely randomly.

Pair Corralation between Haier Smart and Afentra PLC

Assuming the 90 days trading horizon Haier Smart is expected to generate 4.88 times less return on investment than Afentra PLC. But when comparing it to its historical volatility, Haier Smart Home is 1.42 times less risky than Afentra PLC. It trades about 0.01 of its potential returns per unit of risk. Afentra PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Afentra PLC on October 26, 2024 and sell it today you would earn a total of  3.00  from holding Afentra PLC or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Haier Smart Home  vs.  Afentra PLC

Haier Smart Home

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Afentra PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Afentra PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Afentra PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Haier Smart and Afentra PLC

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

The idea behind Haier Smart Home and Afentra PLC 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.