Correlation Between Aimia and Touchstone Exploration

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

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

Diversification Opportunities for Aimia and Touchstone Exploration

-0.02

Correlation Coefficient

Aimia  Touchstone Exploration

Good diversification

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

Pair Corralation between Aimia and Touchstone Exploration

Assuming the 90 days trading horizon Aimia Inc is expected to generate 0.45 times more return on investment than Touchstone Exploration. However, Aimia Inc is 2.2 times less risky than Touchstone Exploration. It trades about 0.03 of its potential returns per unit of risk. Touchstone Exploration is currently generating about -0.11 per unit of risk. If you would invest  264.00  in Aimia Inc on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Aimia Inc or generate 2.65% return on investment over 90 days.

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

Aimia Inc  vs.  Touchstone Exploration

Aimia Inc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aimia Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Aimia is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Touchstone Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aimia and Touchstone Exploration

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

The idea behind Aimia Inc and Touchstone Exploration 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.