Correlation Between Associated Alcohols and Computer Age

Can any of the company-specific risk be diversified away by investing in both Associated Alcohols and Computer Age 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 Computer Age 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 Computer Age Management, you can compare the effects of market volatilities on Associated Alcohols and Computer Age 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 Computer Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and Computer Age.

Diversification Opportunities for Associated Alcohols and Computer Age

0.78

Correlation Coefficient

Associated Alcohols  Computer Age

Poor diversification

The 3 months correlation between Associated and Computer is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Computer Age Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Age Management 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 Computer Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Age Management has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Computer Age go up and down completely randomly.

Pair Corralation between Associated Alcohols and Computer Age

Assuming the 90 days trading horizon Associated Alcohols is expected to generate 1.29 times less return on investment than Computer Age. In addition to that, Associated Alcohols is 1.07 times more volatile than Computer Age Management. It trades about 0.08 of its total potential returns per unit of risk. Computer Age Management is currently generating about 0.11 per unit of volatility. If you would invest  450,624  in Computer Age Management on September 15, 2024 and sell it today you would earn a total of  68,061  from holding Computer Age Management or generate 15.1% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Computer Age Management

Associated Alcohols

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Associated Alcohols may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Computer Age Management

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Associated Alcohols and Computer Age

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

The idea behind Associated Alcohols Breweries and Computer Age Management 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.