Correlation Between Ameriprise Financial and South32

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Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial and South32 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 Ameriprise Financial and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriprise Financial and South32, you can compare the effects of market volatilities on Ameriprise Financial and South32 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 Ameriprise Financial with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and South32.

Diversification Opportunities for Ameriprise Financial and South32

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ameriprise and South32 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and South32 go up and down completely randomly.

Pair Corralation between Ameriprise Financial and South32

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.52 times more return on investment than South32. However, Ameriprise Financial is 1.91 times less risky than South32. It trades about -0.02 of its potential returns per unit of risk. South32 is currently generating about -0.09 per unit of risk. If you would invest  56,541  in Ameriprise Financial on September 10, 2024 and sell it today you would lose (311.00) from holding Ameriprise Financial or give up 0.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Ameriprise Financial  vs.  South32

 Performance 
       Timeline  
Ameriprise Financial 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ameriprise Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
South32 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in South32 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, South32 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Financial and South32 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ameriprise Financial and South32

The main advantage of trading using opposite Ameriprise Financial and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.
The idea behind Ameriprise Financial and South32 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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