Correlation Between American Leisure and Providence Resources
Can any of the company-specific risk be diversified away by investing in both American Leisure and Providence Resources 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 Leisure and Providence Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Leisure Holdings and Providence Resources, you can compare the effects of market volatilities on American Leisure and Providence Resources 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 Leisure with a short position of Providence Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Leisure and Providence Resources.
Diversification Opportunities for American Leisure and Providence Resources
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Providence is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Leisure Holdings and Providence Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Providence Resources and American Leisure 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 Leisure Holdings are associated (or correlated) with Providence Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Providence Resources has no effect on the direction of American Leisure i.e., American Leisure and Providence Resources go up and down completely randomly.
Pair Corralation between American Leisure and Providence Resources
Given the investment horizon of 90 days American Leisure Holdings is expected to generate 4.21 times more return on investment than Providence Resources. However, American Leisure is 4.21 times more volatile than Providence Resources. It trades about 0.15 of its potential returns per unit of risk. Providence Resources is currently generating about -0.09 per unit of risk. If you would invest 0.01 in American Leisure Holdings on September 3, 2024 and sell it today you would earn a total of 0.00 from holding American Leisure Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Leisure Holdings vs. Providence Resources
Performance |
| Timeline |
| American Leisure Holdings |
| Providence Resources |
American Leisure and Providence Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Leisure and Providence Resources
The main advantage of trading using opposite American Leisure and Providence Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Leisure position performs unexpectedly, Providence Resources 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 Providence Resources will offset losses from the drop in Providence Resources' long position.| American Leisure vs. Manaris Corp | American Leisure vs. Green Planet Bio | American Leisure vs. Continental Beverage Brands | American Leisure vs. Opus Magnum Ameris |
| Providence Resources vs. Manaris Corp | Providence Resources vs. Green Planet Bio | Providence Resources vs. Continental Beverage Brands | Providence Resources vs. Opus Magnum Ameris |
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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