Correlation Between SWK Holdings and AA Mission

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

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

Diversification Opportunities for SWK Holdings and AA Mission

0.66

Correlation Coefficient

SWK Holdings  AA Mission

Poor diversification

The 3 months correlation between SWK and AAM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SWK Holdings 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 SWK Holdings 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 SWK Holdings 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 SWK Holdings i.e., SWK Holdings and AA Mission go up and down completely randomly.

Pair Corralation between SWK Holdings and AA Mission

Assuming the 90 days horizon SWK Holdings is expected to generate 2.87 times more return on investment than AA Mission. However, SWK Holdings is 2.87 times more volatile than AA Mission Acquisition. It trades about 0.14 of its potential returns per unit of risk. AA Mission Acquisition is currently generating about 0.15 per unit of risk. If you would invest  2,514  in SWK Holdings on July 5, 2025 and sell it today you would earn a total of  25.00  from holding SWK Holdings or generate 0.99% return on investment over 90 days.

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

SWK Holdings  vs.  AA Mission Acquisition

SWK Holdings

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, SWK Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

AA Mission Acquisition

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in AA Mission Acquisition are ranked lower than 6 (%) 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 SWK Holdings and AA Mission

The main advantage of trading using opposite SWK Holdings and AA Mission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWK Holdings 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 SWK Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..