Correlation Between Adriatic Metals and American International
Can any of the company-specific risk be diversified away by investing in both Adriatic Metals and American International 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 Adriatic Metals and American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adriatic Metals and American International Group, you can compare the effects of market volatilities on Adriatic Metals and American International 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 Adriatic Metals with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and American International.
Diversification Opportunities for Adriatic Metals and American International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adriatic and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and Adriatic Metals 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 Adriatic Metals are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and American International go up and down completely randomly.
Pair Corralation between Adriatic Metals and American International
Assuming the 90 days trading horizon Adriatic Metals is expected to generate 2.42 times more return on investment than American International. However, Adriatic Metals is 2.42 times more volatile than American International Group. It trades about 0.07 of its potential returns per unit of risk. American International Group is currently generating about -0.16 per unit of risk. If you would invest 19,940 in Adriatic Metals on September 12, 2024 and sell it today you would earn a total of 710.00 from holding Adriatic Metals or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adriatic Metals vs. American International Group
Performance |
| Timeline |
| Adriatic Metals |
| American International |
Adriatic Metals and American International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adriatic Metals and American International
The main advantage of trading using opposite Adriatic Metals and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals position performs unexpectedly, American International 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 American International will offset losses from the drop in American International's long position.| Adriatic Metals vs. Anglesey Mining | Adriatic Metals vs. Premier Foods PLC | Adriatic Metals vs. Scandinavian Tobacco Group | Adriatic Metals vs. Park Hotels Resorts |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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