Correlation Between Aerostar Bacau and Alumil Rom

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

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

Diversification Opportunities for Aerostar Bacau and Alumil Rom

-0.07

Correlation Coefficient

Aerostar Bacau  Alumil Rom

Good diversification

The 3 months correlation between Aerostar and Alumil is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aerostar Bacau and Alumil Rom Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Rom Industry and Aerostar Bacau 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 Aerostar Bacau are associated (or correlated) with Alumil Rom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Rom Industry has no effect on the direction of Aerostar Bacau i.e., Aerostar Bacau and Alumil Rom go up and down completely randomly.

Pair Corralation between Aerostar Bacau and Alumil Rom

Assuming the 90 days trading horizon Aerostar Bacau is expected to generate 1.5 times more return on investment than Alumil Rom. However, Aerostar Bacau is 1.5 times more volatile than Alumil Rom Industry. It trades about 0.1 of its potential returns per unit of risk. Alumil Rom Industry is currently generating about -0.06 per unit of risk. If you would invest  848.00  in Aerostar Bacau on December 30, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aerostar Bacau  vs.  Alumil Rom Industry

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 weak basic indicators, Aerostar Bacau displayed solid returns over the last few months and may actually be approaching a breakup point.

Alumil Rom Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alumil Rom Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alumil Rom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerostar Bacau and Alumil Rom

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

The idea behind Aerostar Bacau and Alumil Rom Industry 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.