Correlation Between American Pwr and AdvanSource Biomaterials

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

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

Diversification Opportunities for American Pwr and AdvanSource Biomaterials

-0.21

Correlation Coefficient

American Pwr  AdvanSource Biomaterials

Very good diversification

The 3 months correlation between American and AdvanSource is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Pwr Group and AdvanSource Biomaterials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSource Biomaterials and American Pwr 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 American Pwr Group are associated (or correlated) with AdvanSource Biomaterials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSource Biomaterials has no effect on the direction of American Pwr i.e., American Pwr and AdvanSource Biomaterials go up and down completely randomly.

Pair Corralation between American Pwr and AdvanSource Biomaterials

If you would invest  55.00  in AdvanSource Biomaterials on March 5, 2024 and sell it today you would earn a total of  0.00  from holding AdvanSource Biomaterials or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

American Pwr Group  vs.  AdvanSource Biomaterials

American Pwr Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days American Pwr Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak technical and fundamental indicators, American Pwr demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AdvanSource Biomaterials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvanSource Biomaterials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AdvanSource Biomaterials is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Pwr and AdvanSource Biomaterials

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

The idea behind American Pwr Group and AdvanSource Biomaterials 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.