Correlation Between AIM Industrial and Quality Houses

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

By analyzing existing cross correlation between AIM Industrial Growth and Quality Houses Property, you can compare the effects of market volatilities on AIM Industrial and Quality Houses 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 AIM Industrial with a short position of Quality Houses. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIM Industrial and Quality Houses.

Diversification Opportunities for AIM Industrial and Quality Houses

0.71

Correlation Coefficient

AIM Industrial  Quality Houses

Poor diversification

The 3 months correlation between AIM and Quality is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AIM Industrial Growth and Quality Houses Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Property and AIM Industrial 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 AIM Industrial Growth are associated (or correlated) with Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Property has no effect on the direction of AIM Industrial i.e., AIM Industrial and Quality Houses go up and down completely randomly.

Pair Corralation between AIM Industrial and Quality Houses

Assuming the 90 days trading horizon AIM Industrial is expected to generate 5.55 times less return on investment than Quality Houses. But when comparing it to its historical volatility, AIM Industrial Growth is 2.42 times less risky than Quality Houses. It trades about 0.04 of its potential returns per unit of risk. Quality Houses Property is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Quality Houses Property on September 4, 2024 and sell it today you would earn a total of  51.00  from holding Quality Houses Property or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

AIM Industrial Growth  vs.  Quality Houses Property

AIM Industrial Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIM Industrial Growth are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, AIM Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Quality Houses Property

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Houses Property are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite quite conflicting forward-looking signals, Quality Houses disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIM Industrial and Quality Houses

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

The idea behind AIM Industrial Growth and Quality Houses Property 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.