Correlation Between TARGET and Azure Holding

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

By analyzing existing cross correlation between TARGET P 7 and Azure Holding Group, you can compare the effects of market volatilities on TARGET and Azure Holding 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 TARGET with a short position of Azure Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGET and Azure Holding.

Diversification Opportunities for TARGET and Azure Holding

0.46

Correlation Coefficient

TARGET  Azure Holding

Very weak diversification

The 3 months correlation between TARGET and Azure is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding TARGET P 7 and Azure Holding Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Holding Group and TARGET 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 TARGET P 7 are associated (or correlated) with Azure Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Holding Group has no effect on the direction of TARGET i.e., TARGET and Azure Holding go up and down completely randomly.

Pair Corralation between TARGET and Azure Holding

Assuming the 90 days trading horizon TARGET is expected to generate 168.61 times less return on investment than Azure Holding. But when comparing it to its historical volatility, TARGET P 7 is 41.29 times less risky than Azure Holding. It trades about 0.02 of its potential returns per unit of risk. Azure Holding Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Azure Holding Group on October 9, 2024 and sell it today you would earn a total of  9.98  from holding Azure Holding Group or generate 49900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	38.51%
Values	Daily Returns

TARGET P 7  vs.  Azure Holding Group

TARGET P 7

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

Azure Holding Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Holding Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Azure Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TARGET and Azure Holding

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

The idea behind TARGET P 7 and Azure Holding Group 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.