Correlation Between CirChem AB and AAC Clyde

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

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

Diversification Opportunities for CirChem AB and AAC Clyde

0.73

Correlation Coefficient

CirChem AB  AAC Clyde

Poor diversification

The 3 months correlation between CirChem and AAC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CirChem AB and AAC Clyde Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Clyde Space and CirChem AB 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 CirChem AB are associated (or correlated) with AAC Clyde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Clyde Space has no effect on the direction of CirChem AB i.e., CirChem AB and AAC Clyde go up and down completely randomly.

Pair Corralation between CirChem AB and AAC Clyde

Assuming the 90 days trading horizon CirChem AB is expected to generate 1.64 times less return on investment than AAC Clyde. But when comparing it to its historical volatility, CirChem AB is 1.09 times less risky than AAC Clyde. It trades about 0.1 of its potential returns per unit of risk. AAC Clyde Space is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,475  in AAC Clyde Space on September 3, 2024 and sell it today you would earn a total of  1,325  from holding AAC Clyde Space or generate 38.13% return on investment over 90 days.

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

CirChem AB  vs.  AAC Clyde Space

CirChem AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CirChem AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CirChem AB sustained solid returns over the last few months and may actually be approaching a breakup point.

AAC Clyde Space

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, AAC Clyde unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CirChem AB and AAC Clyde

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

The idea behind CirChem AB and AAC Clyde Space 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.