Correlation Between AeroSpace Technology and Global Standard

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

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

Diversification Opportunities for AeroSpace Technology and Global Standard

0.52

Correlation Coefficient

AeroSpace Technology  Global Standard

Very weak diversification

The 3 months correlation between AeroSpace and Global is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding AeroSpace Technology of and Global Standard Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Standard Tech and AeroSpace Technology 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 AeroSpace Technology of are associated (or correlated) with Global Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Standard Tech has no effect on the direction of AeroSpace Technology i.e., AeroSpace Technology and Global Standard go up and down completely randomly.

Pair Corralation between AeroSpace Technology and Global Standard

Assuming the 90 days trading horizon AeroSpace Technology of is expected to under-perform the Global Standard. But the stock apears to be less risky and, when comparing its historical volatility, AeroSpace Technology of is 1.79 times less risky than Global Standard. The stock trades about -0.07 of its potential returns per unit of risk. The Global Standard Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,516,000  in Global Standard Technology on September 12, 2024 and sell it today you would earn a total of  55,000  from holding Global Standard Technology or generate 3.63% return on investment over 90 days.

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

AeroSpace Technology of  vs.  Global Standard Technology

AeroSpace Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AeroSpace Technology of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Global Standard Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Standard Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global Standard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AeroSpace Technology and Global Standard

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

The idea behind AeroSpace Technology of and Global Standard 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.