Correlation Between President Automobile and AJ Advance

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

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

Diversification Opportunities for President Automobile and AJ Advance

0.89

Correlation Coefficient

President Automobile  AJ Advance

Very poor diversification

The 3 months correlation between President and AJA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding President Automobile Industrie and AJ Advance Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Advance Technology and President Automobile 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 President Automobile Industries are associated (or correlated) with AJ Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Advance Technology has no effect on the direction of President Automobile i.e., President Automobile and AJ Advance go up and down completely randomly.

Pair Corralation between President Automobile and AJ Advance

Assuming the 90 days trading horizon President Automobile Industries is expected to generate 0.33 times more return on investment than AJ Advance. However, President Automobile Industries is 3.02 times less risky than AJ Advance. It trades about -0.08 of its potential returns per unit of risk. AJ Advance Technology is currently generating about -0.07 per unit of risk. If you would invest  158.00  in President Automobile Industries on October 6, 2024 and sell it today you would lose (11.00) from holding President Automobile Industries or give up 6.96% of portfolio value over 90 days.

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

President Automobile Industrie  vs.  AJ Advance Technology

President Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Automobile Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with President Automobile and AJ Advance

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

The idea behind President Automobile Industries and AJ Advance Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.