Correlation Between Appian Corp and AAR Corp

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

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

Diversification Opportunities for Appian Corp and AAR Corp

0.36

Correlation Coefficient

Appian Corp  AAR Corp

Weak diversification

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

Pair Corralation between Appian Corp and AAR Corp

Given the investment horizon of 90 days Appian Corp is expected to generate 1.28 times less return on investment than AAR Corp. But when comparing it to its historical volatility, Appian Corp is 1.01 times less risky than AAR Corp. It trades about 0.16 of its potential returns per unit of risk. AAR Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,081  in AAR Corp on August 30, 2024 and sell it today you would earn a total of  821.00  from holding AAR Corp or generate 13.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Appian Corp  vs.  AAR Corp

Appian Corp

Risk-Adjusted Performance

8 of 100

OK

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

AAR Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Appian Corp and AAR Corp

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

The idea behind Appian Corp and AAR Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.