Correlation Between AAA Technologies and Associated Alcohols

Can any of the company-specific risk be diversified away by investing in both AAA Technologies and Associated Alcohols 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 AAA Technologies and Associated Alcohols into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AAA Technologies Limited and Associated Alcohols Breweries, you can compare the effects of market volatilities on AAA Technologies and Associated Alcohols 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 AAA Technologies with a short position of Associated Alcohols. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAA Technologies and Associated Alcohols.

Diversification Opportunities for AAA Technologies and Associated Alcohols

0.64

Correlation Coefficient

AAA Technologies  Associated Alcohols

Poor diversification

The 3 months correlation between AAA and Associated is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding AAA Technologies Limited and Associated Alcohols Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Alcohols and AAA Technologies 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 AAA Technologies Limited are associated (or correlated) with Associated Alcohols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Alcohols has no effect on the direction of AAA Technologies i.e., AAA Technologies and Associated Alcohols go up and down completely randomly.

Pair Corralation between AAA Technologies and Associated Alcohols

Assuming the 90 days trading horizon AAA Technologies is expected to generate 6.2 times less return on investment than Associated Alcohols. In addition to that, AAA Technologies is 1.37 times more volatile than Associated Alcohols Breweries. It trades about 0.0 of its total potential returns per unit of risk. Associated Alcohols Breweries is currently generating about 0.04 per unit of volatility. If you would invest  91,690  in Associated Alcohols Breweries on September 3, 2024 and sell it today you would earn a total of  3,965  from holding Associated Alcohols Breweries or generate 4.32% return on investment over 90 days.

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

AAA Technologies Limited  vs.  Associated Alcohols Breweries

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, AAA Technologies is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Associated Alcohols

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Associated Alcohols is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AAA Technologies and Associated Alcohols

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

The idea behind AAA Technologies Limited and Associated Alcohols Breweries 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.