Correlation Between Alro Slatina and Aerostar Bacau

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

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

Diversification Opportunities for Alro Slatina and Aerostar Bacau

0.26

Correlation Coefficient

Alro Slatina  Aerostar Bacau

Modest diversification

The 3 months correlation between Alro and Aerostar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Alro Slatina and Aerostar Bacau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerostar Bacau and Alro Slatina 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 Alro Slatina are associated (or correlated) with Aerostar Bacau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerostar Bacau has no effect on the direction of Alro Slatina i.e., Alro Slatina and Aerostar Bacau go up and down completely randomly.

Pair Corralation between Alro Slatina and Aerostar Bacau

Assuming the 90 days trading horizon Alro Slatina is expected to generate 5.7 times less return on investment than Aerostar Bacau. But when comparing it to its historical volatility, Alro Slatina is 1.19 times less risky than Aerostar Bacau. It trades about 0.02 of its potential returns per unit of risk. Aerostar Bacau is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  848.00  in Aerostar Bacau on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Aerostar Bacau or generate 11.79% return on investment over 90 days.

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

Alro Slatina  vs.  Aerostar Bacau

Alro Slatina

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alro Slatina are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Alro Slatina is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aerostar Bacau

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerostar Bacau are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aerostar Bacau displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alro Slatina and Aerostar Bacau

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

The idea behind Alro Slatina and Aerostar Bacau 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.