Correlation Between Emeco Holdings and Aarons

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

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

Diversification Opportunities for Emeco Holdings and Aarons

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Correlation Coefficient

Emeco Holdings  Aarons

Pay attention - limited upside

The 3 months correlation between Emeco and Aarons is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emeco Holdings Limited and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons and Emeco 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 Emeco Holdings Limited are associated (or correlated) with Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of Emeco Holdings i.e., Emeco Holdings and Aarons go up and down completely randomly.

Pair Corralation between Emeco Holdings and Aarons

Assuming the 90 days horizon Emeco Holdings is expected to generate 2.77 times less return on investment than Aarons. But when comparing it to its historical volatility, Emeco Holdings Limited is 2.51 times less risky than Aarons. It trades about 0.09 of its potential returns per unit of risk. The Aarons is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  779.00  in The Aarons on September 5, 2024 and sell it today you would earn a total of  230.00  from holding The Aarons or generate 29.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	66.4%
Values	Daily Returns

Emeco Holdings Limited  vs.  The Aarons

Emeco Holdings

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Emeco Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Emeco Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Aarons

Risk-Adjusted Performance

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Solid

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, Aarons may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emeco Holdings and Aarons

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

The idea behind Emeco Holdings Limited and The Aarons 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.