Correlation Between Aages SA and Aerostar Bacau

Can any of the company-specific risk be diversified away by investing in both Aages SA and Aerostar Bacau 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 Aages SA and Aerostar Bacau into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aages SA and Aerostar Bacau, you can compare the effects of market volatilities on Aages SA and Aerostar Bacau 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 Aages SA with a short position of Aerostar Bacau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aages SA and Aerostar Bacau.

Diversification Opportunities for Aages SA and Aerostar Bacau

0.77

Correlation Coefficient

Aages SA  Aerostar Bacau

Poor diversification

The 3 months correlation between Aages and Aerostar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aages SA and Aerostar Bacau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerostar Bacau and Aages SA 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 Aages SA are associated (or correlated) with Aerostar Bacau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerostar Bacau has no effect on the direction of Aages SA i.e., Aages SA and Aerostar Bacau go up and down completely randomly.

Pair Corralation between Aages SA and Aerostar Bacau

Assuming the 90 days trading horizon Aages SA is expected to generate 3.22 times less return on investment than Aerostar Bacau. But when comparing it to its historical volatility, Aages SA is 1.25 times less risky than Aerostar Bacau. It trades about 0.04 of its potential returns per unit of risk. Aerostar Bacau is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  848.00  in Aerostar Bacau on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Aerostar Bacau or generate 11.79% return on investment over 90 days.

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

Aages SA  vs.  Aerostar Bacau

Aages SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aages SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Aages SA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Aerostar Bacau

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerostar Bacau are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aerostar Bacau displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aages SA and Aerostar Bacau

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

The idea behind Aages SA and Aerostar Bacau 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.