Correlation Between Aperam PK and Acerinox

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

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

Diversification Opportunities for Aperam PK and Acerinox

0.2

Correlation Coefficient

Aperam PK  Acerinox

Modest diversification

The 3 months correlation between Aperam and Acerinox is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aperam PK and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR and Aperam PK 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 Aperam PK are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Aperam PK i.e., Aperam PK and Acerinox go up and down completely randomly.

Pair Corralation between Aperam PK and Acerinox

Assuming the 90 days horizon Aperam PK is expected to generate 1.38 times less return on investment than Acerinox. But when comparing it to its historical volatility, Aperam PK is 1.08 times less risky than Acerinox. It trades about 0.02 of its potential returns per unit of risk. Acerinox SA ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  442.00  in Acerinox SA ADR on September 14, 2024 and sell it today you would earn a total of  71.00  from holding Acerinox SA ADR or generate 16.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.72%
Values	Daily Returns

Aperam PK  vs.  Acerinox SA ADR

Aperam PK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aperam PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Aperam PK showed solid returns over the last few months and may actually be approaching a breakup point.

Acerinox SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Acerinox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aperam PK and Acerinox

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

The idea behind Aperam PK and Acerinox SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.