Correlation Between Auction Technology and EasyJet PLC

Can any of the company-specific risk be diversified away by investing in both Auction Technology and EasyJet PLC 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 Auction Technology and EasyJet PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auction Technology Group and EasyJet PLC, you can compare the effects of market volatilities on Auction Technology and EasyJet PLC 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 Auction Technology with a short position of EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auction Technology and EasyJet PLC.

Diversification Opportunities for Auction Technology and EasyJet PLC

0.93

Correlation Coefficient

Auction Technology  EasyJet PLC

Almost no diversification

The 3 months correlation between Auction and EasyJet is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Auction Technology Group and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC and Auction Technology 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 Auction Technology Group are associated (or correlated) with EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Auction Technology i.e., Auction Technology and EasyJet PLC go up and down completely randomly.

Pair Corralation between Auction Technology and EasyJet PLC

Assuming the 90 days trading horizon Auction Technology Group is expected to generate 1.55 times more return on investment than EasyJet PLC. However, Auction Technology is 1.55 times more volatile than EasyJet PLC. It trades about -0.15 of its potential returns per unit of risk. EasyJet PLC is currently generating about -0.4 per unit of risk. If you would invest  56,900  in Auction Technology Group on October 9, 2024 and sell it today you would lose (2,500) from holding Auction Technology Group or give up 4.39% of portfolio value over 90 days.

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

Auction Technology Group  vs.  EasyJet PLC

Auction Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

EasyJet PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EasyJet PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Auction Technology and EasyJet PLC

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

The idea behind Auction Technology Group and EasyJet 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.