Correlation Between Ralco Agencies and Aerodrome

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

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

Diversification Opportunities for Ralco Agencies and Aerodrome

0.46

Correlation Coefficient

Ralco Agencies  Aerodrome

Very weak diversification

The 3 months correlation between Ralco and Aerodrome is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ralco Agencies and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and Ralco Agencies 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 Ralco Agencies are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of Ralco Agencies i.e., Ralco Agencies and Aerodrome go up and down completely randomly.

Pair Corralation between Ralco Agencies and Aerodrome

Assuming the 90 days trading horizon Ralco Agencies is expected to generate 0.52 times more return on investment than Aerodrome. However, Ralco Agencies is 1.91 times less risky than Aerodrome. It trades about 0.27 of its potential returns per unit of risk. Aerodrome Group is currently generating about -0.04 per unit of risk. If you would invest  419,000  in Ralco Agencies on September 27, 2024 and sell it today you would earn a total of  55,200  from holding Ralco Agencies or generate 13.17% return on investment over 90 days.

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

Ralco Agencies  vs.  Aerodrome Group

Ralco Agencies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ralco Agencies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ralco Agencies sustained solid returns over the last few months and may actually be approaching a breakup point.

Aerodrome Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 12 (%) 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.

Pair Trading with Ralco Agencies and Aerodrome

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

The idea behind Ralco Agencies and Aerodrome 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.