Correlation Between AAPICO Hitech and TRC Construction

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

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

Diversification Opportunities for AAPICO Hitech and TRC Construction

0.4

Correlation Coefficient

AAPICO Hitech  TRC Construction

Very weak diversification

The 3 months correlation between AAPICO and TRC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AAPICO Hitech Public and TRC Construction Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRC Construction Public and AAPICO Hitech 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 AAPICO Hitech Public are associated (or correlated) with TRC Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRC Construction Public has no effect on the direction of AAPICO Hitech i.e., AAPICO Hitech and TRC Construction go up and down completely randomly.

Pair Corralation between AAPICO Hitech and TRC Construction

Assuming the 90 days horizon AAPICO Hitech Public is expected to under-perform the TRC Construction. But the stock apears to be less risky and, when comparing its historical volatility, AAPICO Hitech Public is 3.23 times less risky than TRC Construction. The stock trades about -0.03 of its potential returns per unit of risk. The TRC Construction Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  144.00  in TRC Construction Public on September 2, 2024 and sell it today you would earn a total of  4.00  from holding TRC Construction Public or generate 2.78% return on investment over 90 days.

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

AAPICO Hitech Public  vs.  TRC Construction Public

AAPICO Hitech Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAPICO Hitech Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, AAPICO Hitech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TRC Construction Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TRC Construction Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, TRC Construction disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAPICO Hitech and TRC Construction

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

The idea behind AAPICO Hitech Public and TRC Construction Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.