Correlation Between Airport City and Arad

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

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

Diversification Opportunities for Airport City and Arad

0.69

Correlation Coefficient

Airport City  Arad

Poor diversification

The 3 months correlation between Airport and Arad is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Airport City and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Airport City 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 Airport City are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Airport City i.e., Airport City and Arad go up and down completely randomly.

Pair Corralation between Airport City and Arad

Assuming the 90 days trading horizon Airport City is expected to generate 1.12 times more return on investment than Arad. However, Airport City is 1.12 times more volatile than Arad. It trades about 0.12 of its potential returns per unit of risk. Arad is currently generating about 0.06 per unit of risk. If you would invest  550,500  in Airport City on September 1, 2024 and sell it today you would earn a total of  53,500  from holding Airport City or generate 9.72% return on investment over 90 days.

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

Airport City  vs.  Arad

Airport City

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airport City are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airport City sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Arad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Airport City and Arad

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

The idea behind Airport City and Arad 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..