Correlation Between Aeorema Communications and Abingdon Health

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

Diversification Opportunities for Aeorema Communications and Abingdon Health

-0.36

Correlation Coefficient

Aeorema Communications  Abingdon Health

Very good diversification

The 3 months correlation between Aeorema and Abingdon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Abingdon Health Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abingdon Health Plc 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 Abingdon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abingdon Health Plc has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Abingdon Health go up and down completely randomly.

Pair Corralation between Aeorema Communications and Abingdon Health

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Abingdon Health. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 1.95 times less risky than Abingdon Health. The stock trades about -0.02 of its potential returns per unit of risk. The Abingdon Health Plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Abingdon Health Plc on October 11, 2024 and sell it today you would earn a total of  325.00  from holding Abingdon Health Plc or generate 68.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Aeorema Communications Plc  vs.  Abingdon Health Plc

Aeorema Communications

Risk-Adjusted Performance

0 of 100

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 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.

Abingdon Health Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abingdon Health Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aeorema Communications and Abingdon Health

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

The idea behind Aeorema Communications Plc and Abingdon Health Plc 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.