Correlation Between Central Asia and AJ Bell

Can any of the company-specific risk be diversified away by investing in both Central Asia and AJ Bell 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 AJ Bell 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 AJ Bell plc, you can compare the effects of market volatilities on Central Asia and AJ Bell 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 AJ Bell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and AJ Bell.

Diversification Opportunities for Central Asia and AJ Bell

-0.26

Correlation Coefficient

Central Asia  AJ Bell

Very good diversification

The 3 months correlation between Central and AJB is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and AJ Bell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Bell plc 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 AJ Bell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Bell plc has no effect on the direction of Central Asia i.e., Central Asia and AJ Bell go up and down completely randomly.

Pair Corralation between Central Asia and AJ Bell

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the AJ Bell. In addition to that, Central Asia is 1.23 times more volatile than AJ Bell plc. It trades about -0.22 of its total potential returns per unit of risk. AJ Bell plc is currently generating about 0.33 per unit of volatility. If you would invest  44,600  in AJ Bell plc on September 4, 2024 and sell it today you would earn a total of  3,400  from holding AJ Bell plc or generate 7.62% 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.  AJ Bell plc

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AJ Bell plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AJ Bell plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, AJ Bell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Central Asia and AJ Bell

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

The idea behind Central Asia Metals and AJ Bell 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..