Correlation Between Auction Technology and Inspired Plc

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

Diversification Opportunities for Auction Technology and Inspired Plc

0.6

Correlation Coefficient

Auction Technology  Inspired Plc

Poor diversification

The 3 months correlation between Auction and Inspired is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Auction Technology Group and Inspired Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired 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 Inspired Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Plc has no effect on the direction of Auction Technology i.e., Auction Technology and Inspired Plc go up and down completely randomly.

Pair Corralation between Auction Technology and Inspired Plc

Assuming the 90 days trading horizon Auction Technology is expected to generate 12.96 times less return on investment than Inspired Plc. But when comparing it to its historical volatility, Auction Technology Group is 2.27 times less risky than Inspired Plc. It trades about 0.03 of its potential returns per unit of risk. Inspired Plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Inspired Plc on December 24, 2024 and sell it today you would earn a total of  1,400  from holding Inspired Plc or generate 33.73% return on investment over 90 days.

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

Auction Technology Group  vs.  Inspired Plc

Auction Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Auction Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Inspired Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspired Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auction Technology and Inspired Plc

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

The idea behind Auction Technology Group and Inspired 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.