Correlation Between Aware and Research Solutions

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

By analyzing existing cross correlation between Aware Inc and Research Solutions, you can compare the effects of market volatilities on Aware and Research Solutions 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 Aware with a short position of Research Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aware and Research Solutions.

Diversification Opportunities for Aware and Research Solutions

-0.49

Correlation Coefficient

Aware  Research Solutions

Very good diversification

The 3 months correlation between Aware and Research is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aware Inc and Research Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Research Solutions and Aware 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 Aware Inc are associated (or correlated) with Research Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Research Solutions has no effect on the direction of Aware i.e., Aware and Research Solutions go up and down completely randomly.

Pair Corralation between Aware and Research Solutions

Given the investment horizon of 90 days Aware is expected to generate 2.7 times less return on investment than Research Solutions. In addition to that, Aware is 1.48 times more volatile than Research Solutions. It trades about 0.02 of its total potential returns per unit of risk. Research Solutions is currently generating about 0.06 per unit of volatility. If you would invest  197.00  in Research Solutions on October 11, 2024 and sell it today you would earn a total of  198.00  from holding Research Solutions or generate 100.51% return on investment over 90 days.

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

Aware Inc  vs.  Research Solutions

Aware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Research Solutions

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Research Solutions are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Research Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aware and Research Solutions

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

The idea behind Aware Inc and Research Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.