Correlation Between CB Industrial and Aeon Credit

Can any of the company-specific risk be diversified away by investing in both CB Industrial and Aeon Credit 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 CB Industrial and Aeon Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CB Industrial Product and Aeon Credit Service, you can compare the effects of market volatilities on CB Industrial and Aeon Credit 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 CB Industrial with a short position of Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and Aeon Credit.

Diversification Opportunities for CB Industrial and Aeon Credit

0.26

Correlation Coefficient

CB Industrial  Aeon Credit

Modest diversification

The 3 months correlation between 7076 and Aeon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service and CB Industrial 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 CB Industrial Product are associated (or correlated) with Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of CB Industrial i.e., CB Industrial and Aeon Credit go up and down completely randomly.

Pair Corralation between CB Industrial and Aeon Credit

Assuming the 90 days trading horizon CB Industrial Product is expected to under-perform the Aeon Credit. In addition to that, CB Industrial is 2.24 times more volatile than Aeon Credit Service. It trades about -0.19 of its total potential returns per unit of risk. Aeon Credit Service is currently generating about -0.41 per unit of volatility. If you would invest  632.00  in Aeon Credit Service on October 26, 2024 and sell it today you would lose (38.00) from holding Aeon Credit Service or give up 6.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

CB Industrial Product  vs.  Aeon Credit Service

CB Industrial Product

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CB Industrial Product has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CB Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with CB Industrial and Aeon Credit

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

The idea behind CB Industrial Product and Aeon Credit Service 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.