Correlation Between AEON and KARRAT

Can any of the company-specific risk be diversified away by investing in both AEON and KARRAT 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 AEON and KARRAT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEON and KARRAT, you can compare the effects of market volatilities on AEON and KARRAT 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 AEON with a short position of KARRAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEON and KARRAT.

Diversification Opportunities for AEON and KARRAT

0.02

Correlation Coefficient

AEON  KARRAT

Significant diversification

The 3 months correlation between AEON and KARRAT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AEON and KARRAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KARRAT and AEON 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 AEON are associated (or correlated) with KARRAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KARRAT has no effect on the direction of AEON i.e., AEON and KARRAT go up and down completely randomly.

Pair Corralation between AEON and KARRAT

Assuming the 90 days trading horizon AEON is expected to generate 0.29 times more return on investment than KARRAT. However, AEON is 3.45 times less risky than KARRAT. It trades about -0.03 of its potential returns per unit of risk. KARRAT is currently generating about -0.15 per unit of risk. If you would invest  24.00  in AEON on November 27, 2024 and sell it today you would lose (2.00) from holding AEON or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

AEON  vs.  KARRAT

AEON

Risk-Adjusted Performance

Very Weak

Over the last 90 days AEON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, AEON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KARRAT

Risk-Adjusted Performance

Very Weak

Over the last 90 days KARRAT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for KARRAT investors.

Pair Trading with AEON and KARRAT

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

The idea behind AEON and KARRAT 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.