Correlation Between ABM International and Vertoz Advertising

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

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

Diversification Opportunities for ABM International and Vertoz Advertising

-0.67

Correlation Coefficient

ABM International  Vertoz Advertising

Excellent diversification

The 3 months correlation between ABM and Vertoz is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ABM International Limited and Vertoz Advertising Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertoz Advertising and ABM International 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 ABM International Limited are associated (or correlated) with Vertoz Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertoz Advertising has no effect on the direction of ABM International i.e., ABM International and Vertoz Advertising go up and down completely randomly.

Pair Corralation between ABM International and Vertoz Advertising

Assuming the 90 days trading horizon ABM International Limited is expected to generate 1.2 times more return on investment than Vertoz Advertising. However, ABM International is 1.2 times more volatile than Vertoz Advertising Limited. It trades about 0.08 of its potential returns per unit of risk. Vertoz Advertising Limited is currently generating about -0.32 per unit of risk. If you would invest  6,076  in ABM International Limited on September 2, 2024 and sell it today you would earn a total of  1,152  from holding ABM International Limited or generate 18.96% return on investment over 90 days.

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

ABM International Limited  vs.  Vertoz Advertising Limited

ABM International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABM International Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, ABM International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Vertoz Advertising

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertoz Advertising Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ABM International and Vertoz Advertising

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

The idea behind ABM International Limited and Vertoz Advertising Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.