Correlation Between AKA Brands and Boohoo PLC

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

By analyzing existing cross correlation between AKA Brands Holding and BoohooCom PLC ADR, you can compare the effects of market volatilities on AKA Brands and Boohoo PLC 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 AKA Brands with a short position of Boohoo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKA Brands and Boohoo PLC.

Diversification Opportunities for AKA Brands and Boohoo PLC

-0.45

Correlation Coefficient

AKA Brands  Boohoo PLC

Very good diversification

The 3 months correlation between AKA and Boohoo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding AKA Brands Holding and BoohooCom PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BoohooCom PLC ADR and AKA Brands 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 AKA Brands Holding are associated (or correlated) with Boohoo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BoohooCom PLC ADR has no effect on the direction of AKA Brands i.e., AKA Brands and Boohoo PLC go up and down completely randomly.

Pair Corralation between AKA Brands and Boohoo PLC

Considering the 90-day investment horizon AKA Brands Holding is expected to under-perform the Boohoo PLC. In addition to that, AKA Brands is 4.24 times more volatile than BoohooCom PLC ADR. It trades about -0.11 of its total potential returns per unit of risk. BoohooCom PLC ADR is currently generating about 0.21 per unit of volatility. If you would invest  768.00  in BoohooCom PLC ADR on September 9, 2024 and sell it today you would earn a total of  53.00  from holding BoohooCom PLC ADR or generate 6.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

AKA Brands Holding  vs.  BoohooCom PLC ADR

AKA Brands Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, AKA Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BoohooCom PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boohoo PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKA Brands and Boohoo PLC

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

The idea behind AKA Brands Holding and BoohooCom PLC ADR 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.