Correlation Between AAC Clyde and Ensurge Micropower

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

Diversification Opportunities for AAC Clyde and Ensurge Micropower

0.47

Correlation Coefficient

AAC Clyde  Ensurge Micropower

Very weak diversification

The 3 months correlation between AAC and Ensurge is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space and Ensurge Micropower ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensurge Micropower ASA 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 Ensurge Micropower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensurge Micropower ASA has no effect on the direction of AAC Clyde i.e., AAC Clyde and Ensurge Micropower go up and down completely randomly.

Pair Corralation between AAC Clyde and Ensurge Micropower

Assuming the 90 days horizon AAC Clyde is expected to generate 3.23 times less return on investment than Ensurge Micropower. But when comparing it to its historical volatility, AAC Clyde Space is 4.21 times less risky than Ensurge Micropower. It trades about 0.21 of its potential returns per unit of risk. Ensurge Micropower ASA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Ensurge Micropower ASA on December 5, 2024 and sell it today you would earn a total of  13.00  from holding Ensurge Micropower ASA or generate 38.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

AAC Clyde Space  vs.  Ensurge Micropower ASA

AAC Clyde Space

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, AAC Clyde reported solid returns over the last few months and may actually be approaching a breakup point.

Ensurge Micropower ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensurge Micropower ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ensurge Micropower showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAC Clyde and Ensurge Micropower

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

The idea behind AAC Clyde Space and Ensurge Micropower ASA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.