Correlation Between CLO and AKRO

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

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

Diversification Opportunities for CLO and AKRO

-0.17

Correlation Coefficient

CLO  AKRO

Good diversification

The 3 months correlation between CLO and AKRO is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CLO and AKRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKRO and CLO 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 CLO are associated (or correlated) with AKRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKRO has no effect on the direction of CLO i.e., CLO and AKRO go up and down completely randomly.

Pair Corralation between CLO and AKRO

Assuming the 90 days trading horizon CLO is expected to generate 45.45 times more return on investment than AKRO. However, CLO is 45.45 times more volatile than AKRO. It trades about 0.31 of its potential returns per unit of risk. AKRO is currently generating about 0.03 per unit of risk. If you would invest  0.01  in CLO on September 1, 2024 and sell it today you would earn a total of  0.00  from holding CLO or generate 40.0% return on investment over 90 days.

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

CLO  vs.  AKRO

CLO

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CLO are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CLO exhibited solid returns over the last few months and may actually be approaching a breakup point.

AKRO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AKRO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, AKRO may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CLO and AKRO

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

The idea behind CLO and AKRO 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.