Correlation Between AAP and Cann American
Can any of the company-specific risk be diversified away by investing in both AAP and Cann 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 AAP and Cann American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAP Inc and Cann American Corp, you can compare the effects of market volatilities on AAP and Cann 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 AAP with a short position of Cann American. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and Cann American.
Diversification Opportunities for AAP and Cann American
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AAP and Cann is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Cann American Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cann American Corp and AAP 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 AAP Inc are associated (or correlated) with Cann American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cann American Corp has no effect on the direction of AAP i.e., AAP and Cann American go up and down completely randomly.
Pair Corralation between AAP and Cann American
Given the investment horizon of 90 days AAP Inc is expected to generate 0.77 times more return on investment than Cann American. However, AAP Inc is 1.29 times less risky than Cann American. It trades about 0.06 of its potential returns per unit of risk. Cann American Corp is currently generating about -0.07 per unit of risk. If you would invest 0.02 in AAP Inc on September 4, 2024 and sell it today you would earn a total of 0.00 from holding AAP Inc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
AAP Inc vs. Cann American Corp
Performance |
| Timeline |
| AAP Inc |
| Cann American Corp |
AAP and Cann American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAP and Cann American
The main advantage of trading using opposite AAP and Cann American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAP position performs unexpectedly, Cann 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 Cann American will offset losses from the drop in Cann American's long position.The idea behind AAP Inc and Cann American Corp 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.| Cann American vs. XCPCNL Business Services | Cann American vs. Golden Developing Solutions | Cann American vs. Indo Global Exchange | Cann American vs. Cgrowth Capital |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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