Correlation Between Central Asia and Aeorema Communications

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

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

Diversification Opportunities for Central Asia and Aeorema Communications

-0.16

Correlation Coefficient

Central Asia  Aeorema Communications

Good diversification

The 3 months correlation between Central and Aeorema is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Central Asia 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 Central Asia Metals are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Central Asia i.e., Central Asia and Aeorema Communications go up and down completely randomly.

Pair Corralation between Central Asia and Aeorema Communications

Assuming the 90 days trading horizon Central Asia Metals is expected to generate 1.34 times more return on investment than Aeorema Communications. However, Central Asia is 1.34 times more volatile than Aeorema Communications Plc. It trades about 0.08 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.2 per unit of risk. If you would invest  15,300  in Central Asia Metals on December 29, 2024 and sell it today you would earn a total of  1,480  from holding Central Asia Metals or generate 9.67% return on investment over 90 days.

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

Central Asia Metals  vs.  Aeorema Communications Plc

Central Asia Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Asia Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Central Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aeorema Communications

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Central Asia and Aeorema Communications

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

The idea behind Central Asia Metals and Aeorema Communications 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .