Correlation Between Aitken Spence and E M

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

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

Diversification Opportunities for Aitken Spence and E M

0.7

Correlation Coefficient

Aitken Spence  E M

Poor diversification

The 3 months correlation between Aitken and EMLN0000 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aitken Spence Hotel and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Aitken Spence 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 Aitken Spence Hotel are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Aitken Spence i.e., Aitken Spence and E M go up and down completely randomly.

Pair Corralation between Aitken Spence and E M

Assuming the 90 days trading horizon Aitken Spence Hotel is expected to generate 0.66 times more return on investment than E M. However, Aitken Spence Hotel is 1.52 times less risky than E M. It trades about -0.01 of its potential returns per unit of risk. E M L is currently generating about -0.06 per unit of risk. If you would invest  8,240  in Aitken Spence Hotel on December 10, 2024 and sell it today you would lose (90.00) from holding Aitken Spence Hotel or give up 1.09% of portfolio value over 90 days.

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

Aitken Spence Hotel  vs.  E M L

Aitken Spence Hotel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aitken Spence Hotel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aitken Spence may actually be approaching a critical reversion point that can send shares even higher in April 2025.

E M L

Risk-Adjusted Performance

Very Weak

Over the last 90 days E M L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aitken Spence and E M

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

The idea behind Aitken Spence Hotel and E M L 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.