Correlation Between Aeorema Communications and Sligro Food

Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Sligro Food 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 Sligro Food 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 Sligro Food Group, you can compare the effects of market volatilities on Aeorema Communications and Sligro Food 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 Sligro Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Sligro Food.

Diversification Opportunities for Aeorema Communications and Sligro Food

0.35

Correlation Coefficient

Aeorema Communications  Sligro Food

Weak diversification

The 3 months correlation between Aeorema and Sligro is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Sligro Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sligro Food Group 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 Sligro Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sligro Food Group has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Sligro Food go up and down completely randomly.

Pair Corralation between Aeorema Communications and Sligro Food

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Sligro Food. In addition to that, Aeorema Communications is 1.25 times more volatile than Sligro Food Group. It trades about -0.07 of its total potential returns per unit of risk. Sligro Food Group is currently generating about 0.04 per unit of volatility. If you would invest  1,058  in Sligro Food Group on November 20, 2024 and sell it today you would earn a total of  25.00  from holding Sligro Food Group or generate 2.36% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  Sligro Food Group

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 unsteady 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.

Sligro Food Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sligro Food Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sligro Food 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 Sligro Food

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

The idea behind Aeorema Communications Plc and Sligro Food Group 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.