Correlation Between AJ Plast and Energy Absolute

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

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

Diversification Opportunities for AJ Plast and Energy Absolute

0.36

Correlation Coefficient

AJ Plast  Energy Absolute

Weak diversification

The 3 months correlation between AJ Plast and Energy is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AJ Plast Public and Energy Absolute Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Absolute Public and AJ Plast 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 AJ Plast Public are associated (or correlated) with Energy Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Absolute Public has no effect on the direction of AJ Plast i.e., AJ Plast and Energy Absolute go up and down completely randomly.

Pair Corralation between AJ Plast and Energy Absolute

Assuming the 90 days horizon AJ Plast Public is expected to generate 22.61 times more return on investment than Energy Absolute. However, AJ Plast is 22.61 times more volatile than Energy Absolute Public. It trades about 0.11 of its potential returns per unit of risk. Energy Absolute Public is currently generating about -0.02 per unit of risk. If you would invest  535.00  in AJ Plast Public on August 31, 2024 and sell it today you would lose (53.00) from holding AJ Plast Public or give up 9.91% of portfolio value over 90 days.

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

AJ Plast Public  vs.  Energy Absolute Public

AJ Plast Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AJ Plast Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, AJ Plast disclosed solid returns over the last few months and may actually be approaching a breakup point.

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with AJ Plast and Energy Absolute

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

The idea behind AJ Plast Public and Energy Absolute 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.