Correlation Between AAP and Aerkomm

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

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

Diversification Opportunities for AAP and Aerkomm

0.0

Correlation Coefficient

AAP  Aerkomm

Pay attention - limited upside

The 3 months correlation between AAP and Aerkomm is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Aerkomm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerkomm and AAP 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 AAP Inc are associated (or correlated) with Aerkomm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerkomm has no effect on the direction of AAP i.e., AAP and Aerkomm go up and down completely randomly.

Pair Corralation between AAP and Aerkomm

If you would invest  0.03  in AAP Inc on September 3, 2024 and sell it today you would lose (0.01) from holding AAP Inc or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

AAP Inc  vs.  Aerkomm

AAP Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Aerkomm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerkomm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aerkomm is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AAP and Aerkomm

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

The idea behind AAP Inc and Aerkomm 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.