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

-0.37

Correlation Coefficient

Aeorema Communications  Roper Technologies

Very good diversification

The 3 months correlation between Aeorema and Roper is -0.37. 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. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 2.47 times less risky than Roper Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Roper Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  41,664  in Roper Technologies on December 2, 2024 and sell it today you would earn a total of  16,423  from holding Roper Technologies or generate 39.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.8%
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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Roper Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Roper Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.