Correlation Between Aerodrome and Seach Medical

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

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

Diversification Opportunities for Aerodrome and Seach Medical

0.69

Correlation Coefficient

Aerodrome  Seach Medical

Poor diversification

The 3 months correlation between Aerodrome and Seach is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aerodrome Group and Seach Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seach Medical Group and Aerodrome 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 Aerodrome Group are associated (or correlated) with Seach Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seach Medical Group has no effect on the direction of Aerodrome i.e., Aerodrome and Seach Medical go up and down completely randomly.

Pair Corralation between Aerodrome and Seach Medical

Assuming the 90 days trading horizon Aerodrome Group is expected to generate 5.9 times more return on investment than Seach Medical. However, Aerodrome is 5.9 times more volatile than Seach Medical Group. It trades about 0.14 of its potential returns per unit of risk. Seach Medical Group is currently generating about 0.42 per unit of risk. If you would invest  3,650  in Aerodrome Group on September 26, 2024 and sell it today you would earn a total of  2,990  from holding Aerodrome Group or generate 81.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.83%
Values	Daily Returns

Aerodrome Group  vs.  Seach Medical Group

Aerodrome Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Seach Medical Group

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Seach Medical Group are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seach Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerodrome and Seach Medical

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

The idea behind Aerodrome Group and Seach Medical Group 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.