Correlation Between Aristotle Value and Aristotle International

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

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

Diversification Opportunities for Aristotle Value and Aristotle International

-0.17

Correlation Coefficient

Aristotle Value  Aristotle International

Good diversification

The 3 months correlation between Aristotle and Aristotle is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aristotle Value Eq and Aristotle International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle International and Aristotle Value 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 Aristotle Value Eq are associated (or correlated) with Aristotle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle International has no effect on the direction of Aristotle Value i.e., Aristotle Value and Aristotle International go up and down completely randomly.

Pair Corralation between Aristotle Value and Aristotle International

Assuming the 90 days horizon Aristotle Value Eq is expected to under-perform the Aristotle International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aristotle Value Eq is 1.0 times less risky than Aristotle International. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Aristotle International Eq is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,107  in Aristotle International Eq on September 19, 2024 and sell it today you would lose (35.00) from holding Aristotle International Eq or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aristotle Value Eq  vs.  Aristotle International Eq

Aristotle Value Eq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Value Eq has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aristotle Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristotle International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle International Eq has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aristotle International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aristotle Value and Aristotle International

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

The idea behind Aristotle Value Eq and Aristotle International Eq 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.