Correlation Between AENA SME and H FARM

Can any of the company-specific risk be diversified away by investing in both AENA SME and H FARM 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 AENA SME and H FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AENA SME UNSPADR110 and H FARM SPA, you can compare the effects of market volatilities on AENA SME and H FARM 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 AENA SME with a short position of H FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of AENA SME and H FARM.

Diversification Opportunities for AENA SME and H FARM

-0.4

Correlation Coefficient

AENA SME  H FARM

Very good diversification

The 3 months correlation between AENA and 5JQ is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AENA SME UNSPADR110 and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA and AENA SME 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 AENA SME UNSPADR110 are associated (or correlated) with H FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of AENA SME i.e., AENA SME and H FARM go up and down completely randomly.

Pair Corralation between AENA SME and H FARM

Assuming the 90 days trading horizon AENA SME UNSPADR110 is expected to generate 0.28 times more return on investment than H FARM. However, AENA SME UNSPADR110 is 3.52 times less risky than H FARM. It trades about 0.07 of its potential returns per unit of risk. H FARM SPA is currently generating about -0.01 per unit of risk. If you would invest  1,810  in AENA SME UNSPADR110 on September 13, 2024 and sell it today you would earn a total of  100.00  from holding AENA SME UNSPADR110 or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

AENA SME UNSPADR110  vs.  H FARM SPA

AENA SME UNSPADR110

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AENA SME UNSPADR110 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AENA SME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H FARM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AENA SME and H FARM

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

The idea behind AENA SME UNSPADR110 and H FARM SPA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.