Correlation Between Better World and AIRA Factoring

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

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

Diversification Opportunities for Better World and AIRA Factoring

0.44

Correlation Coefficient

Better World  AIRA Factoring

Very weak diversification

The 3 months correlation between Better and AIRA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Better World Green and AIRA Factoring Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRA Factoring Public and Better World 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 Better World Green are associated (or correlated) with AIRA Factoring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRA Factoring Public has no effect on the direction of Better World i.e., Better World and AIRA Factoring go up and down completely randomly.

Pair Corralation between Better World and AIRA Factoring

Assuming the 90 days trading horizon Better World is expected to generate 12.0 times less return on investment than AIRA Factoring. But when comparing it to its historical volatility, Better World Green is 2.11 times less risky than AIRA Factoring. It trades about 0.01 of its potential returns per unit of risk. AIRA Factoring Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  55.00  in AIRA Factoring Public on September 2, 2024 and sell it today you would earn a total of  3.00  from holding AIRA Factoring Public or generate 5.45% return on investment over 90 days.

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

Better World Green  vs.  AIRA Factoring Public

Better World Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Green has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Better World is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AIRA Factoring Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIRA Factoring Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, AIRA Factoring disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Better World and AIRA Factoring

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

The idea behind Better World Green and AIRA Factoring 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.