Correlation Between LRN and AEON

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

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

Diversification Opportunities for LRN and AEON

-0.03

Correlation Coefficient

LRN  AEON

Good diversification

The 3 months correlation between LRN and AEON is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding LRN and AEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON and LRN 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 LRN are associated (or correlated) with AEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON has no effect on the direction of LRN i.e., LRN and AEON go up and down completely randomly.

Pair Corralation between LRN and AEON

Assuming the 90 days trading horizon LRN is expected to under-perform the AEON. In addition to that, LRN is 2.4 times more volatile than AEON. It trades about -0.05 of its total potential returns per unit of risk. AEON is currently generating about 0.02 per unit of volatility. If you would invest  16.00  in AEON on January 30, 2024 and sell it today you would earn a total of  0.00  from holding AEON or generate 0.0% return on investment over 90 days.

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

LRN  vs.  AEON

LRN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LRN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for LRN shareholders.

AEON

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AEON are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AEON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LRN and AEON

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

The idea behind LRN and AEON 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.