Correlation Between Aeorema Communications and Royal Bank

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

Diversification Opportunities for Aeorema Communications and Royal Bank

-0.2

Correlation Coefficient

Aeorema Communications  Royal Bank

Good diversification

The 3 months correlation between Aeorema and Royal is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Royal Bank go up and down completely randomly.

Pair Corralation between Aeorema Communications and Royal Bank

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 2.91 times more return on investment than Royal Bank. However, Aeorema Communications is 2.91 times more volatile than Royal Bank of. It trades about 0.11 of its potential returns per unit of risk. Royal Bank of is currently generating about -0.48 per unit of risk. If you would invest  5,182  in Aeorema Communications Plc on October 7, 2024 and sell it today you would earn a total of  168.00  from holding Aeorema Communications Plc or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Aeorema Communications Plc  vs.  Royal Bank of

Aeorema Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Aeorema Communications is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Royal Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royal Bank 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 Royal Bank

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

The idea behind Aeorema Communications Plc and Royal Bank of 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.