Correlation Between THR and AION
Can any of the company-specific risk be diversified away by investing in both THR and AION 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 THR and AION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THR and AION, you can compare the effects of market volatilities on THR and AION 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 THR with a short position of AION. Check out your portfolio center. Please also check ongoing floating volatility patterns of THR and AION.
Diversification Opportunities for THR and AION
Modest diversification
The 3 months correlation between THR and AION is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding THR and AION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AION and THR 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 THR are associated (or correlated) with AION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AION has no effect on the direction of THR i.e., THR and AION go up and down completely randomly.
Pair Corralation between THR and AION
Assuming the 90 days trading horizon THR is expected to generate 20.74 times less return on investment than AION. But when comparing it to its historical volatility, THR is 5.32 times less risky than AION. It trades about 0.04 of its potential returns per unit of risk. AION is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 8.30 in AION on January 17, 2024 and sell it today you would lose (7.79) from holding AION or give up 93.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.98% |
| Values | Daily Returns |
THR vs. AION
Performance |
| Timeline |
| THR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| AION |
THR and AION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THR and AION
The main advantage of trading using opposite THR and AION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THR position performs unexpectedly, AION 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 AION will offset losses from the drop in AION's long position.The idea behind THR and AION 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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