Correlation Between Prime Financial and Aeris Environmental

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

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

Diversification Opportunities for Prime Financial and Aeris Environmental

0.22

Correlation Coefficient

Prime Financial  Aeris Environmental

Modest diversification

The 3 months correlation between Prime and Aeris is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental and Prime Financial 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 Prime Financial Group are associated (or correlated) with Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Prime Financial i.e., Prime Financial and Aeris Environmental go up and down completely randomly.

Pair Corralation between Prime Financial and Aeris Environmental

Assuming the 90 days trading horizon Prime Financial Group is expected to generate 2.21 times more return on investment than Aeris Environmental. However, Prime Financial is 2.21 times more volatile than Aeris Environmental. It trades about -0.05 of its potential returns per unit of risk. Aeris Environmental is currently generating about -0.2 per unit of risk. If you would invest  24.00  in Prime Financial Group on October 4, 2024 and sell it today you would lose (1.00) from holding Prime Financial Group or give up 4.17% of portfolio value over 90 days.

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

Prime Financial Group  vs.  Aeris Environmental

Prime Financial Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Prime Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aeris Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeris Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Prime Financial and Aeris Environmental

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

The idea behind Prime Financial Group and Aeris Environmental 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.