Correlation Between BCN and AEON

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

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

Diversification Opportunities for BCN and AEON

0.11

Correlation Coefficient

BCN  AEON

Average diversification

The 3 months correlation between BCN and AEON is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BCN and AEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON and BCN 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 BCN are associated (or correlated) with AEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON has no effect on the direction of BCN i.e., BCN and AEON go up and down completely randomly.

Pair Corralation between BCN and AEON

Assuming the 90 days trading horizon BCN is expected to generate 7.0 times more return on investment than AEON. However, BCN is 7.0 times more volatile than AEON. It trades about 0.06 of its potential returns per unit of risk. AEON is currently generating about -0.01 per unit of risk. If you would invest  0.00  in BCN on December 28, 2024 and sell it today you would lose  0.00  from holding BCN or give up 24.24% of portfolio value over 90 days.

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

BCN  vs.  AEON

BCN

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

AEON

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BCN and AEON

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

The idea behind BCN and AEON 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.