Correlation Between Aura FAT and Ace Global

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

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

Diversification Opportunities for Aura FAT and Ace Global

0.69

Correlation Coefficient

Aura FAT  Ace Global

Poor diversification

The 3 months correlation between Aura and Ace is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aura FAT Projects and Ace Global Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Global Business and Aura FAT 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 Aura FAT Projects are associated (or correlated) with Ace Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Global Business has no effect on the direction of Aura FAT i.e., Aura FAT and Ace Global go up and down completely randomly.

Pair Corralation between Aura FAT and Ace Global

Given the investment horizon of 90 days Aura FAT is expected to generate 1.35 times less return on investment than Ace Global. In addition to that, Aura FAT is 1.86 times more volatile than Ace Global Business. It trades about 0.07 of its total potential returns per unit of risk. Ace Global Business is currently generating about 0.17 per unit of volatility. If you would invest  1,074  in Ace Global Business on October 11, 2024 and sell it today you would earn a total of  60.00  from holding Ace Global Business or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	30.99%
Values	Daily Returns

Aura FAT Projects  vs.  Ace Global Business

Aura FAT Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aura FAT Projects has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Aura FAT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ace Global Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ace Global Business has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Ace Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aura FAT and Ace Global

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

The idea behind Aura FAT Projects and Ace Global Business 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.