Correlation Between Aeorema Communications and Roper Technologies

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

By analyzing existing cross correlation between Aeorema Communications Plc and Roper Technologies, you can compare the effects of market volatilities on Aeorema Communications and Roper Technologies 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 Aeorema Communications with a short position of Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Roper Technologies.

Diversification Opportunities for Aeorema Communications and Roper Technologies

-0.56

Correlation Coefficient

Aeorema Communications  Roper Technologies

Excellent diversification

The 3 months correlation between Aeorema and Roper is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Roper Technologies go up and down completely randomly.

Pair Corralation between Aeorema Communications and Roper Technologies

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Roper Technologies. In addition to that, Aeorema Communications is 1.33 times more volatile than Roper Technologies. It trades about -0.2 of its total potential returns per unit of risk. Roper Technologies is currently generating about 0.17 per unit of volatility. If you would invest  51,665  in Roper Technologies on December 30, 2024 and sell it today you would earn a total of  6,848  from holding Roper Technologies or generate 13.25% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  Roper Technologies

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Roper Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Roper Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aeorema Communications and Roper Technologies

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

The idea behind Aeorema Communications Plc and Roper Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.