Correlation Between Associated British and Aryzta AG

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

By analyzing existing cross correlation between Associated British Foods and Aryzta AG PK, you can compare the effects of market volatilities on Associated British and Aryzta AG 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 British with a short position of Aryzta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Aryzta AG.

Diversification Opportunities for Associated British and Aryzta AG

-0.35

Correlation Coefficient

Associated British  Aryzta AG

Very good diversification

The 3 months correlation between Associated and Aryzta is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Aryzta AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryzta AG PK and Associated British 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 British Foods are associated (or correlated) with Aryzta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryzta AG PK has no effect on the direction of Associated British i.e., Associated British and Aryzta AG go up and down completely randomly.

Pair Corralation between Associated British and Aryzta AG

Assuming the 90 days horizon Associated British Foods is expected to under-perform the Aryzta AG. But the pink sheet apears to be less risky and, when comparing its historical volatility, Associated British Foods is 3.94 times less risky than Aryzta AG. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Aryzta AG PK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Aryzta AG PK on December 30, 2024 and sell it today you would earn a total of  24.00  from holding Aryzta AG PK or generate 27.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Associated British Foods  vs.  Aryzta AG PK

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Associated British is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aryzta AG PK

Risk-Adjusted Performance

OK

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

Pair Trading with Associated British and Aryzta AG

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

The idea behind Associated British Foods and Aryzta AG PK 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.