Correlation Between Generic Engineering and AAA Technologies

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

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

Diversification Opportunities for Generic Engineering and AAA Technologies

0.07

Correlation Coefficient

Generic Engineering  AAA Technologies

Significant diversification

The 3 months correlation between Generic and AAA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of Generic Engineering i.e., Generic Engineering and AAA Technologies go up and down completely randomly.

Pair Corralation between Generic Engineering and AAA Technologies

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 1.26 times more return on investment than AAA Technologies. However, Generic Engineering is 1.26 times more volatile than AAA Technologies Limited. It trades about 0.03 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about -0.05 per unit of risk. If you would invest  4,140  in Generic Engineering Construction on October 6, 2024 and sell it today you would earn a total of  133.00  from holding Generic Engineering Construction or generate 3.21% return on investment over 90 days.

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

Generic Engineering Constructi  vs.  AAA Technologies Limited

Generic Engineering

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Generic Engineering and AAA Technologies

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

The idea behind Generic Engineering Construction and AAA Technologies Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.