Correlation Between Aeorema Communications and Light Science

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

Diversification Opportunities for Aeorema Communications and Light Science

0.43

Correlation Coefficient

Aeorema Communications  Light Science

Very weak diversification

The 3 months correlation between Aeorema and Light is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Light Science Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Science Techno 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 Light Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Science Techno has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Light Science go up and down completely randomly.

Pair Corralation between Aeorema Communications and Light Science

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Light Science. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 1.24 times less risky than Light Science. The stock trades about -0.13 of its potential returns per unit of risk. The Light Science Technologies is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Light Science Technologies on October 11, 2024 and sell it today you would lose (10.00) from holding Light Science Technologies or give up 3.51% of portfolio value over 90 days.

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

Aeorema Communications Plc  vs.  Light Science Technologies

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.

Light Science Techno

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Light Science Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Light Science may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aeorema Communications and Light Science

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

The idea behind Aeorema Communications Plc and Light Science 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..