Correlation Between AION and HC

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

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

Diversification Opportunities for AION and HC

0.66

Correlation Coefficient

AION  HC

Poor diversification

The 3 months correlation between AION and HC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AION and HC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HC and AION 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 AION are associated (or correlated) with HC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HC has no effect on the direction of AION i.e., AION and HC go up and down completely randomly.

Pair Corralation between AION and HC

Assuming the 90 days trading horizon AION is expected to generate 1.13 times more return on investment than HC. However, AION is 1.13 times more volatile than HC. It trades about 0.13 of its potential returns per unit of risk. HC is currently generating about 0.09 per unit of risk. If you would invest  0.14  in AION on December 27, 2024 and sell it today you would lose (0.08) from holding AION or give up 56.79% of portfolio value over 90 days.

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

AION  vs.  HC

AION

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AION are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, AION exhibited solid returns over the last few months and may actually be approaching a breakup point.

HC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, HC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AION and HC

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

The idea behind AION and HC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.