Correlation Between Applied DB and AIRA Factoring

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

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

Diversification Opportunities for Applied DB and AIRA Factoring

0.33

Correlation Coefficient

Applied DB  AIRA Factoring

Weak diversification

The 3 months correlation between Applied and AIRA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Applied DB Public and AIRA Factoring Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRA Factoring Public and Applied DB 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 Applied DB Public are associated (or correlated) with AIRA Factoring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRA Factoring Public has no effect on the direction of Applied DB i.e., Applied DB and AIRA Factoring go up and down completely randomly.

Pair Corralation between Applied DB and AIRA Factoring

Assuming the 90 days trading horizon Applied DB Public is expected to generate 12.8 times more return on investment than AIRA Factoring. However, Applied DB is 12.8 times more volatile than AIRA Factoring Public. It trades about 0.04 of its potential returns per unit of risk. AIRA Factoring Public is currently generating about -0.01 per unit of risk. If you would invest  124.00  in Applied DB Public on September 27, 2024 and sell it today you would lose (36.00) from holding Applied DB Public or give up 29.03% of portfolio value over 90 days.

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

Applied DB Public  vs.  AIRA Factoring Public

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AIRA Factoring Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIRA Factoring Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Applied DB and AIRA Factoring

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

The idea behind Applied DB Public and AIRA Factoring Public 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.