Correlation Between AJ Advance and Teka Construction

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

By analyzing existing cross correlation between AJ Advance Technology and Teka Construction PCL, you can compare the effects of market volatilities on AJ Advance and Teka Construction 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 AJ Advance with a short position of Teka Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of AJ Advance and Teka Construction.

Diversification Opportunities for AJ Advance and Teka Construction

0.35

Correlation Coefficient

AJ Advance  Teka Construction

Weak diversification

The 3 months correlation between AJA and Teka is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AJ Advance Technology and Teka Construction PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teka Construction PCL and AJ Advance 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 AJ Advance Technology are associated (or correlated) with Teka Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teka Construction PCL has no effect on the direction of AJ Advance i.e., AJ Advance and Teka Construction go up and down completely randomly.

Pair Corralation between AJ Advance and Teka Construction

Assuming the 90 days trading horizon AJ Advance Technology is expected to generate 2.55 times more return on investment than Teka Construction. However, AJ Advance is 2.55 times more volatile than Teka Construction PCL. It trades about -0.02 of its potential returns per unit of risk. Teka Construction PCL is currently generating about -0.06 per unit of risk. If you would invest  17.00  in AJ Advance Technology on September 5, 2024 and sell it today you would lose (2.00) from holding AJ Advance Technology or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

AJ Advance Technology  vs.  Teka Construction PCL

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Teka Construction PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teka Construction PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals 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 AJ Advance and Teka Construction

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

The idea behind AJ Advance Technology and Teka Construction PCL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.