Correlation Between African Discovery and Aarons

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

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

Diversification Opportunities for African Discovery and Aarons

-0.73

Correlation Coefficient

African Discovery  Aarons

Pay attention - limited upside

The 3 months correlation between African and Aarons is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons and African Discovery 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 African Discovery Group are associated (or correlated) with Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of African Discovery i.e., African Discovery and Aarons go up and down completely randomly.

Pair Corralation between African Discovery and Aarons

Given the investment horizon of 90 days African Discovery Group is expected to under-perform the Aarons. In addition to that, African Discovery is 10.14 times more volatile than The Aarons. It trades about -0.17 of its total potential returns per unit of risk. The Aarons is currently generating about 0.13 per unit of volatility. If you would invest  999.00  in The Aarons on September 12, 2024 and sell it today you would earn a total of  10.00  from holding The Aarons or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	26.56%
Values	Daily Returns

African Discovery Group  vs.  The Aarons

African Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Discovery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aarons

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with African Discovery and Aarons

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

The idea behind African Discovery Group and The Aarons 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.