Correlation Between American Business and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both American Business and Freedom Bank 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 American Business and Freedom Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Business Bk and Freedom Bank of, you can compare the effects of market volatilities on American Business and Freedom Bank 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 American Business with a short position of Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Business and Freedom Bank.
Diversification Opportunities for American Business and Freedom Bank
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Freedom is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Business Bk and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank and American Business 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 American Business Bk are associated (or correlated) with Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of American Business i.e., American Business and Freedom Bank go up and down completely randomly.
Pair Corralation between American Business and Freedom Bank
Given the investment horizon of 90 days American Business Bk is expected to generate 1.18 times more return on investment than Freedom Bank. However, American Business is 1.18 times more volatile than Freedom Bank of. It trades about 0.02 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.06 per unit of risk. If you would invest 3,980 in American Business Bk on September 19, 2024 and sell it today you would earn a total of 430.00 from holding American Business Bk or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 85.65% |
| Values | Daily Returns |
American Business Bk vs. Freedom Bank of
Performance |
| Timeline |
| American Business |
| Freedom Bank |
American Business and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Business and Freedom Bank
The main advantage of trading using opposite American Business and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Business position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank's long position.| American Business vs. HUMANA INC | American Business vs. Barloworld Ltd ADR | American Business vs. Morningstar Unconstrained Allocation | American Business vs. Thrivent High Yield |
| Freedom Bank vs. HUMANA INC | Freedom Bank vs. Barloworld Ltd ADR | Freedom Bank vs. Morningstar Unconstrained Allocation | Freedom Bank vs. Thrivent High Yield |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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