Correlation Between Avanos Medical and First American
Can any of the company-specific risk be diversified away by investing in both Avanos Medical and First American 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 Avanos Medical and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avanos Medical and First American Financial, you can compare the effects of market volatilities on Avanos Medical and First American 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 Avanos Medical with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and First American.
Diversification Opportunities for Avanos Medical and First American
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Avanos and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and First American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Financial and Avanos Medical 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 Avanos Medical are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Financial has no effect on the direction of Avanos Medical i.e., Avanos Medical and First American go up and down completely randomly.
Pair Corralation between Avanos Medical and First American
Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the First American. In addition to that, Avanos Medical is 1.84 times more volatile than First American Financial. It trades about 0.0 of its total potential returns per unit of risk. First American Financial is currently generating about 0.04 per unit of volatility. If you would invest 5,532 in First American Financial on September 14, 2024 and sell it today you would earn a total of 618.00 from holding First American Financial or generate 11.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avanos Medical vs. First American Financial
Performance |
| Timeline |
| Avanos Medical |
| First American Financial |
Avanos Medical and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avanos Medical and First American
The main advantage of trading using opposite Avanos Medical and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
| First American vs. FARO Technologies | First American vs. Uber Technologies | First American vs. Jacquet Metal Service | First American vs. ADRIATIC METALS LS 013355 |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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