Correlation Between Aeon and Dillards

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

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

Diversification Opportunities for Aeon and Dillards

-0.32

Correlation Coefficient

Aeon  Dillards

Very good diversification

The 3 months correlation between Aeon and Dillards is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aeon Co and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and Aeon 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 Aeon Co are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Aeon i.e., Aeon and Dillards go up and down completely randomly.

Pair Corralation between Aeon and Dillards

Assuming the 90 days trading horizon Aeon Co is expected to under-perform the Dillards. But the stock apears to be less risky and, when comparing its historical volatility, Aeon Co is 1.55 times less risky than Dillards. The stock trades about -0.09 of its potential returns per unit of risk. The Dillards is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  30,871  in Dillards on September 23, 2024 and sell it today you would earn a total of  10,329  from holding Dillards or generate 33.46% return on investment over 90 days.

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

Aeon Co  vs.  Dillards

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dillards

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dillards reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeon and Dillards

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

The idea behind Aeon Co and Dillards 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.