Correlation Between Aena SA and Parlem Telecom

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

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

Diversification Opportunities for Aena SA and Parlem Telecom

0.47

Correlation Coefficient

Aena SA  Parlem Telecom

Very weak diversification

The 3 months correlation between Aena and Parlem is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aena SA and Parlem Telecom Companyia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parlem Telecom ia and Aena SA 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 Aena SA are associated (or correlated) with Parlem Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parlem Telecom ia has no effect on the direction of Aena SA i.e., Aena SA and Parlem Telecom go up and down completely randomly.

Pair Corralation between Aena SA and Parlem Telecom

Assuming the 90 days trading horizon Aena SA is expected to generate 1.27 times less return on investment than Parlem Telecom. But when comparing it to its historical volatility, Aena SA is 1.77 times less risky than Parlem Telecom. It trades about 0.06 of its potential returns per unit of risk. Parlem Telecom Companyia is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  320.00  in Parlem Telecom Companyia on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Parlem Telecom Companyia or generate 4.38% return on investment over 90 days.

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

Aena SA  vs.  Parlem Telecom Companyia

Aena SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Aena SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Parlem Telecom ia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parlem Telecom Companyia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Parlem Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aena SA and Parlem Telecom

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

The idea behind Aena SA and Parlem Telecom Companyia 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .