Correlation Between AAC Clyde and CirChem AB

Can any of the company-specific risk be diversified away by investing in both AAC Clyde and CirChem AB 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 AAC Clyde and CirChem AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AAC Clyde Space and CirChem AB, you can compare the effects of market volatilities on AAC Clyde and CirChem AB 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 AAC Clyde with a short position of CirChem AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAC Clyde and CirChem AB.

Diversification Opportunities for AAC Clyde and CirChem AB

0.73

Correlation Coefficient

AAC Clyde  CirChem AB

Poor diversification

The 3 months correlation between AAC and CirChem is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space and CirChem AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CirChem AB and AAC Clyde 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 AAC Clyde Space are associated (or correlated) with CirChem AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CirChem AB has no effect on the direction of AAC Clyde i.e., AAC Clyde and CirChem AB go up and down completely randomly.

Pair Corralation between AAC Clyde and CirChem AB

Assuming the 90 days trading horizon AAC Clyde Space is expected to generate 1.09 times more return on investment than CirChem AB. However, AAC Clyde is 1.09 times more volatile than CirChem AB. It trades about 0.14 of its potential returns per unit of risk. CirChem AB is currently generating about 0.1 per unit of risk. If you would invest  3,475  in AAC Clyde Space on September 3, 2024 and sell it today you would earn a total of  1,325  from holding AAC Clyde Space or generate 38.13% return on investment over 90 days.

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

AAC Clyde Space  vs.  CirChem AB

AAC Clyde Space

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, AAC Clyde unveiled solid returns over the last few months and may actually be approaching a breakup point.

CirChem AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CirChem AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CirChem AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAC Clyde and CirChem AB

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

The idea behind AAC Clyde Space and CirChem AB 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.