Correlation Between Drugs Made and AA Mission

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

By analyzing existing cross correlation between Drugs Made In and AA Mission Acquisition, you can compare the effects of market volatilities on Drugs Made and AA Mission 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 Drugs Made with a short position of AA Mission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drugs Made and AA Mission.

Diversification Opportunities for Drugs Made and AA Mission

-0.27

Correlation Coefficient

Drugs Made  AA Mission

Very good diversification

The 3 months correlation between Drugs and AAM is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Drugs Made In and AA Mission Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AA Mission Acquisition and Drugs Made 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 Drugs Made In are associated (or correlated) with AA Mission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AA Mission Acquisition has no effect on the direction of Drugs Made i.e., Drugs Made and AA Mission go up and down completely randomly.

Pair Corralation between Drugs Made and AA Mission

Given the investment horizon of 90 days Drugs Made In is expected to generate 0.89 times more return on investment than AA Mission. However, Drugs Made In is 1.12 times less risky than AA Mission. It trades about 0.16 of its potential returns per unit of risk. AA Mission Acquisition is currently generating about 0.1 per unit of risk. If you would invest  996.00  in Drugs Made In on February 1, 2025 and sell it today you would earn a total of  13.00  from holding Drugs Made In or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.75%
Values	Daily Returns

Drugs Made In  vs.  AA Mission Acquisition

Drugs Made In

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Drugs Made In are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Drugs Made is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AA Mission Acquisition

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AA Mission Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AA Mission is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Drugs Made and AA Mission

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

The idea behind Drugs Made In and AA Mission Acquisition 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.