Correlation Between AAA Technologies and Cantabil Retail

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

By analyzing existing cross correlation between AAA Technologies Limited and Cantabil Retail India, you can compare the effects of market volatilities on AAA Technologies and Cantabil Retail 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 AAA Technologies with a short position of Cantabil Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAA Technologies and Cantabil Retail.

Diversification Opportunities for AAA Technologies and Cantabil Retail

0.66

Correlation Coefficient

AAA Technologies  Cantabil Retail

Poor diversification

The 3 months correlation between AAA and Cantabil is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AAA Technologies Limited and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India and AAA Technologies 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 AAA Technologies Limited are associated (or correlated) with Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of AAA Technologies i.e., AAA Technologies and Cantabil Retail go up and down completely randomly.

Pair Corralation between AAA Technologies and Cantabil Retail

Assuming the 90 days trading horizon AAA Technologies Limited is expected to generate 1.59 times more return on investment than Cantabil Retail. However, AAA Technologies is 1.59 times more volatile than Cantabil Retail India. It trades about -0.01 of its potential returns per unit of risk. Cantabil Retail India is currently generating about -0.05 per unit of risk. If you would invest  12,170  in AAA Technologies Limited on August 31, 2024 and sell it today you would lose (681.00) from holding AAA Technologies Limited or give up 5.6% of portfolio value over 90 days.

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

AAA Technologies Limited  vs.  Cantabil Retail India

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, AAA Technologies is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Cantabil Retail India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cantabil Retail India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with AAA Technologies and Cantabil Retail

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

The idea behind AAA Technologies Limited and Cantabil Retail India 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.