Correlation Between AAC Clyde and Momentum Group

Can any of the company-specific risk be diversified away by investing in both AAC Clyde and Momentum Group 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 Momentum Group 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 Momentum Group AB, you can compare the effects of market volatilities on AAC Clyde and Momentum Group 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 Momentum Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAC Clyde and Momentum Group.

Diversification Opportunities for AAC Clyde and Momentum Group

-0.26

Correlation Coefficient

AAC Clyde  Momentum Group

Very good diversification

The 3 months correlation between AAC and Momentum is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space and Momentum Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentum Group 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 Momentum Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentum Group AB has no effect on the direction of AAC Clyde i.e., AAC Clyde and Momentum Group go up and down completely randomly.

Pair Corralation between AAC Clyde and Momentum Group

Assuming the 90 days trading horizon AAC Clyde Space is expected to generate 1.72 times more return on investment than Momentum Group. However, AAC Clyde is 1.72 times more volatile than Momentum Group AB. It trades about 0.13 of its potential returns per unit of risk. Momentum Group AB is currently generating about 0.05 per unit of risk. If you would invest  3,550  in AAC Clyde Space on September 2, 2024 and sell it today you would earn a total of  1,250  from holding AAC Clyde Space or generate 35.21% return on investment over 90 days.

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

AAC Clyde Space  vs.  Momentum Group AB

AAC Clyde Space

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 10 (%) 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.

Momentum Group AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Momentum Group AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Momentum Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AAC Clyde and Momentum Group

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

The idea behind AAC Clyde Space and Momentum Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.