Correlation Between AAC Clyde and Saab AB

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

Diversification Opportunities for AAC Clyde and Saab AB

0.68

Correlation Coefficient

AAC Clyde  Saab AB

Poor diversification

The 3 months correlation between AAC and Saab is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space and Saab AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saab 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 Saab AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saab AB has no effect on the direction of AAC Clyde i.e., AAC Clyde and Saab AB go up and down completely randomly.

Pair Corralation between AAC Clyde and Saab AB

Assuming the 90 days trading horizon AAC Clyde Space is expected to generate 1.47 times more return on investment than Saab AB. However, AAC Clyde is 1.47 times more volatile than Saab AB. It trades about 0.12 of its potential returns per unit of risk. Saab AB is currently generating about 0.03 per unit of risk. If you would invest  3,550  in AAC Clyde Space on August 31, 2024 and sell it today you would earn a total of  1,020  from holding AAC Clyde Space or generate 28.73% 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.  Saab AB

AAC Clyde Space

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, AAC Clyde unveiled solid returns over the last few months and may actually be approaching a breakup point.

Saab AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Saab AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Saab AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AAC Clyde and Saab AB

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

The idea behind AAC Clyde Space and Saab 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.