Correlation Between Associated Alcohols and 20 Microns

Can any of the company-specific risk be diversified away by investing in both Associated Alcohols and 20 Microns 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 Associated Alcohols and 20 Microns into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Alcohols Breweries and 20 Microns Limited, you can compare the effects of market volatilities on Associated Alcohols and 20 Microns 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 Associated Alcohols with a short position of 20 Microns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and 20 Microns.

Diversification Opportunities for Associated Alcohols and 20 Microns

-0.27

Correlation Coefficient

Associated Alcohols  20 Microns

Very good diversification

The 3 months correlation between Associated and 20MICRONS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and 20 Microns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 20 Microns Limited and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with 20 Microns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 20 Microns Limited has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and 20 Microns go up and down completely randomly.

Pair Corralation between Associated Alcohols and 20 Microns

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.36 times more return on investment than 20 Microns. However, Associated Alcohols is 1.36 times more volatile than 20 Microns Limited. It trades about 0.12 of its potential returns per unit of risk. 20 Microns Limited is currently generating about -0.08 per unit of risk. If you would invest  104,090  in Associated Alcohols Breweries on December 29, 2024 and sell it today you would earn a total of  35,135  from holding Associated Alcohols Breweries or generate 33.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Associated Alcohols Breweries  vs.  20 Microns Limited

Associated Alcohols

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

20 Microns Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days 20 Microns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Associated Alcohols and 20 Microns

The main advantage of trading using opposite Associated Alcohols and 20 Microns positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Alcohols position performs unexpectedly, 20 Microns 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 20 Microns will offset losses from the drop in 20 Microns' long position.

The idea behind Associated Alcohols Breweries and 20 Microns Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..