Correlation Between ClearOne and AAP

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Can any of the company-specific risk be diversified away by investing in both ClearOne and AAP 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 ClearOne and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ClearOne and AAP Inc, you can compare the effects of market volatilities on ClearOne and AAP 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 ClearOne with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearOne and AAP.

Diversification Opportunities for ClearOne and AAP

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ClearOne and AAP is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ClearOne and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and ClearOne 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 ClearOne are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of ClearOne i.e., ClearOne and AAP go up and down completely randomly.

Pair Corralation between ClearOne and AAP

Given the investment horizon of 90 days ClearOne is expected to generate 8.46 times less return on investment than AAP. But when comparing it to its historical volatility, ClearOne is 3.44 times less risky than AAP. It trades about 0.03 of its potential returns per unit of risk. AAP Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.80  in AAP Inc on September 5, 2024 and sell it today you would lose (1.79) from holding AAP Inc or give up 99.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

ClearOne  vs.  AAP Inc

 Performance 
       Timeline  
ClearOne 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ClearOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
AAP Inc 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

ClearOne and AAP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ClearOne and AAP

The main advantage of trading using opposite ClearOne and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearOne position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.
The idea behind ClearOne and AAP Inc 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.
Check out your portfolio center.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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