Correlation Between Boohoo PLC and AKA Brands

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

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

Diversification Opportunities for Boohoo PLC and AKA Brands

-0.45

Correlation Coefficient

Boohoo PLC  AKA Brands

Very good diversification

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

Pair Corralation between Boohoo PLC and AKA Brands

Assuming the 90 days horizon BoohooCom PLC ADR is expected to generate 0.21 times more return on investment than AKA Brands. However, BoohooCom PLC ADR is 4.68 times less risky than AKA Brands. It trades about 0.18 of its potential returns per unit of risk. AKA Brands Holding is currently generating about -0.02 per unit of risk. If you would invest  712.00  in BoohooCom PLC ADR on September 10, 2024 and sell it today you would earn a total of  109.00  from holding BoohooCom PLC ADR or generate 15.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BoohooCom PLC ADR  vs.  AKA Brands Holding

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.

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 latest uncertain performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Boohoo PLC and AKA Brands

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

The idea behind BoohooCom PLC ADR and AKA Brands Holding 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.