Correlation Between Aitken Spence and THE KINGSBURY

Can any of the company-specific risk be diversified away by investing in both Aitken Spence and THE KINGSBURY 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 THE KINGSBURY 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 THE KINGSBURY PLC, you can compare the effects of market volatilities on Aitken Spence and THE KINGSBURY 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 THE KINGSBURY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aitken Spence and THE KINGSBURY.

Diversification Opportunities for Aitken Spence and THE KINGSBURY

0.93

Correlation Coefficient

Aitken Spence  THE KINGSBURY

Almost no diversification

The 3 months correlation between Aitken and THE is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Aitken Spence Hotel and THE KINGSBURY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THE KINGSBURY PLC 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 THE KINGSBURY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THE KINGSBURY PLC has no effect on the direction of Aitken Spence i.e., Aitken Spence and THE KINGSBURY go up and down completely randomly.

Pair Corralation between Aitken Spence and THE KINGSBURY

Assuming the 90 days trading horizon Aitken Spence is expected to generate 2.04 times less return on investment than THE KINGSBURY. But when comparing it to its historical volatility, Aitken Spence Hotel is 1.38 times less risky than THE KINGSBURY. It trades about 0.13 of its potential returns per unit of risk. THE KINGSBURY PLC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,280  in THE KINGSBURY PLC on October 27, 2024 and sell it today you would earn a total of  130.00  from holding THE KINGSBURY PLC or generate 10.16% return on investment over 90 days.

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

Aitken Spence Hotel  vs.  THE KINGSBURY PLC

Aitken Spence Hotel

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aitken Spence Hotel are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aitken Spence sustained solid returns over the last few months and may actually be approaching a breakup point.

THE KINGSBURY PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in THE KINGSBURY PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, THE KINGSBURY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aitken Spence and THE KINGSBURY

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

The idea behind Aitken Spence Hotel and THE KINGSBURY PLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.