Correlation Between Eternal Energy and AJ Advance

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

By analyzing existing cross correlation between Eternal Energy Public and AJ Advance Technology, you can compare the effects of market volatilities on Eternal Energy and AJ Advance 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 Eternal Energy with a short position of AJ Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Energy and AJ Advance.

Diversification Opportunities for Eternal Energy and AJ Advance

-0.31

Correlation Coefficient

Eternal Energy  AJ Advance

Very good diversification

The 3 months correlation between Eternal and AJA is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and AJ Advance Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Advance Technology and Eternal Energy 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 Eternal Energy Public are associated (or correlated) with AJ Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Advance Technology has no effect on the direction of Eternal Energy i.e., Eternal Energy and AJ Advance go up and down completely randomly.

Pair Corralation between Eternal Energy and AJ Advance

Assuming the 90 days horizon Eternal Energy Public is expected to generate 2.29 times more return on investment than AJ Advance. However, Eternal Energy is 2.29 times more volatile than AJ Advance Technology. It trades about 0.26 of its potential returns per unit of risk. AJ Advance Technology is currently generating about -0.07 per unit of risk. If you would invest  17.00  in Eternal Energy Public on September 13, 2024 and sell it today you would earn a total of  45.00  from holding Eternal Energy Public or generate 264.71% return on investment over 90 days.

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

Eternal Energy Public  vs.  AJ Advance Technology

Eternal Energy Public

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

AJ Advance Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Advance Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eternal Energy and AJ Advance

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

The idea behind Eternal Energy Public and AJ Advance Technology 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.