Correlation Between Boutique Newcity and AJ Plast

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

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

Diversification Opportunities for Boutique Newcity and AJ Plast

0.95

Correlation Coefficient

Boutique Newcity  AJ Plast

Almost no diversification

The 3 months correlation between Boutique and AJ Plast is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Boutique Newcity Public and AJ Plast Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Plast Public and Boutique Newcity 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 Boutique Newcity Public are associated (or correlated) with AJ Plast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Plast Public has no effect on the direction of Boutique Newcity i.e., Boutique Newcity and AJ Plast go up and down completely randomly.

Pair Corralation between Boutique Newcity and AJ Plast

Assuming the 90 days trading horizon Boutique Newcity is expected to generate 1.0 times less return on investment than AJ Plast. In addition to that, Boutique Newcity is 1.0 times more volatile than AJ Plast Public. It trades about 0.12 of its total potential returns per unit of risk. AJ Plast Public is currently generating about 0.12 per unit of volatility. If you would invest  0.00  in AJ Plast Public on September 3, 2024 and sell it today you would earn a total of  480.00  from holding AJ Plast Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Boutique Newcity Public  vs.  AJ Plast Public

Boutique Newcity Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boutique Newcity Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Boutique Newcity disclosed solid returns over the last few months and may actually be approaching a breakup point.

AJ Plast Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AJ Plast Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, AJ Plast disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boutique Newcity and AJ Plast

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

The idea behind Boutique Newcity Public and AJ Plast Public 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.