Correlation Between Automatic Bank and Human Xtensions

Can any of the company-specific risk be diversified away by investing in both Automatic Bank and Human Xtensions 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 Automatic Bank and Human Xtensions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Automatic Bank Services and Human Xtensions, you can compare the effects of market volatilities on Automatic Bank and Human Xtensions 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 Automatic Bank with a short position of Human Xtensions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Bank and Human Xtensions.

Diversification Opportunities for Automatic Bank and Human Xtensions

0.14

Correlation Coefficient

Automatic Bank  Human Xtensions

Average diversification

The 3 months correlation between Automatic and Human is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Bank Services and Human Xtensions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Human Xtensions and Automatic Bank 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 Automatic Bank Services are associated (or correlated) with Human Xtensions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Human Xtensions has no effect on the direction of Automatic Bank i.e., Automatic Bank and Human Xtensions go up and down completely randomly.

Pair Corralation between Automatic Bank and Human Xtensions

Assuming the 90 days trading horizon Automatic Bank Services is expected to generate 0.35 times more return on investment than Human Xtensions. However, Automatic Bank Services is 2.82 times less risky than Human Xtensions. It trades about 0.13 of its potential returns per unit of risk. Human Xtensions is currently generating about 0.0 per unit of risk. If you would invest  234,200  in Automatic Bank Services on December 29, 2024 and sell it today you would earn a total of  36,600  from holding Automatic Bank Services or generate 15.63% return on investment over 90 days.

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

Automatic Bank Services  vs.  Human Xtensions

Automatic Bank Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Automatic Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Human Xtensions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Human Xtensions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Human Xtensions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automatic Bank and Human Xtensions

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

The idea behind Automatic Bank Services and Human Xtensions 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.