Correlation Between Greenroc Mining and Aeorema Communications

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

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

Diversification Opportunities for Greenroc Mining and Aeorema Communications

0.17

Correlation Coefficient

Greenroc Mining  Aeorema Communications

Average diversification

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

Pair Corralation between Greenroc Mining and Aeorema Communications

Assuming the 90 days trading horizon Greenroc Mining PLC is expected to under-perform the Aeorema Communications. In addition to that, Greenroc Mining is 2.18 times more volatile than Aeorema Communications Plc. It trades about -0.03 of its total potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.03 per unit of volatility. If you would invest  7,256  in Aeorema Communications Plc on November 20, 2024 and sell it today you would lose (2,456) from holding Aeorema Communications Plc or give up 33.85% of portfolio value over 90 days.

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

Greenroc Mining PLC  vs.  Aeorema Communications Plc

Greenroc Mining PLC

Risk-Adjusted Performance

Very Weak

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

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Greenroc Mining and Aeorema Communications

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

The idea behind Greenroc Mining PLC and Aeorema Communications 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.