Correlation Between Aberforth Smaller and Primorus Investments

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

By analyzing existing cross correlation between Aberforth Smaller Companies and Primorus Investments plc, you can compare the effects of market volatilities on Aberforth Smaller and Primorus Investments 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 Aberforth Smaller with a short position of Primorus Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberforth Smaller and Primorus Investments.

Diversification Opportunities for Aberforth Smaller and Primorus Investments

-0.43

Correlation Coefficient

Aberforth Smaller  Primorus Investments

Very good diversification

The 3 months correlation between Aberforth and Primorus is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies and Primorus Investments plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primorus Investments plc and Aberforth Smaller 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 Aberforth Smaller Companies are associated (or correlated) with Primorus Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primorus Investments plc has no effect on the direction of Aberforth Smaller i.e., Aberforth Smaller and Primorus Investments go up and down completely randomly.

Pair Corralation between Aberforth Smaller and Primorus Investments

Assuming the 90 days trading horizon Aberforth Smaller Companies is expected to under-perform the Primorus Investments. But the stock apears to be less risky and, when comparing its historical volatility, Aberforth Smaller Companies is 2.85 times less risky than Primorus Investments. The stock trades about -0.28 of its potential returns per unit of risk. The Primorus Investments plc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  410.00  in Primorus Investments plc on October 9, 2024 and sell it today you would lose (10.00) from holding Primorus Investments plc or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aberforth Smaller Companies  vs.  Primorus Investments plc

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aberforth Smaller is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Primorus Investments plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Primorus Investments plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Primorus Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aberforth Smaller and Primorus Investments

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

The idea behind Aberforth Smaller Companies and Primorus Investments plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.