Correlation Between CalAmp Corp and AAP

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

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

Diversification Opportunities for CalAmp Corp and AAP

-0.06

Correlation Coefficient

CalAmp Corp  AAP

Good diversification

The 3 months correlation between CalAmp and AAP is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CalAmp Corp and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and CalAmp Corp 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 CalAmp Corp are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of CalAmp Corp i.e., CalAmp Corp and AAP go up and down completely randomly.

Pair Corralation between CalAmp Corp and AAP

Given the investment horizon of 90 days CalAmp Corp is expected to generate 2.42 times more return on investment than AAP. However, CalAmp Corp is 2.42 times more volatile than AAP Inc. It trades about 0.03 of its potential returns per unit of risk. AAP Inc is currently generating about 0.03 per unit of risk. If you would invest  12,742  in CalAmp Corp on February 3, 2024 and sell it today you would lose (12,398) from holding CalAmp Corp or give up 97.3% of portfolio value over 90 days.

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

CalAmp Corp  vs.  AAP Inc

CalAmp Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CalAmp Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, CalAmp Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AAP Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CalAmp Corp and AAP

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

The idea behind CalAmp Corp and AAP Inc 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.