Correlation Between AAP and Millennium Investment

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

By analyzing existing cross correlation between AAP Inc and Millennium Investment Acquisition, you can compare the effects of market volatilities on AAP and Millennium Investment 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 AAP with a short position of Millennium Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and Millennium Investment.

Diversification Opportunities for AAP and Millennium Investment

-0.02

Correlation Coefficient

AAP  Millennium Investment

Good diversification

The 3 months correlation between AAP and Millennium is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Millennium Investment Acquisit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millennium Investment and AAP 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 AAP Inc are associated (or correlated) with Millennium Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millennium Investment has no effect on the direction of AAP i.e., AAP and Millennium Investment go up and down completely randomly.

Pair Corralation between AAP and Millennium Investment

Given the investment horizon of 90 days AAP Inc is expected to generate 2.77 times more return on investment than Millennium Investment. However, AAP is 2.77 times more volatile than Millennium Investment Acquisition. It trades about 0.16 of its potential returns per unit of risk. Millennium Investment Acquisition is currently generating about 0.06 per unit of risk. If you would invest  0.02  in AAP Inc on December 29, 2024 and sell it today you would earn a total of  0.00  from holding AAP Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

AAP Inc  vs.  Millennium Investment Acquisit

AAP Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Millennium Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Millennium Investment Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Millennium Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAP and Millennium Investment

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

The idea behind AAP Inc and Millennium Investment Acquisition 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.