Correlation Between American Superconductor and Cummins
Can any of the company-specific risk be diversified away by investing in both American Superconductor and Cummins 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 Superconductor and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Superconductor and Cummins, you can compare the effects of market volatilities on American Superconductor and Cummins 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 Superconductor with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Superconductor and Cummins.
Diversification Opportunities for American Superconductor and Cummins
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Cummins is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and American Superconductor 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 Superconductor are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of American Superconductor i.e., American Superconductor and Cummins go up and down completely randomly.
Pair Corralation between American Superconductor and Cummins
Given the investment horizon of 90 days American Superconductor is expected to generate 3.37 times more return on investment than Cummins. However, American Superconductor is 3.37 times more volatile than Cummins. It trades about 0.24 of its potential returns per unit of risk. Cummins is currently generating about 0.26 per unit of risk. If you would invest 2,348 in American Superconductor on August 31, 2024 and sell it today you would earn a total of 889.00 from holding American Superconductor or generate 37.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Superconductor vs. Cummins
Performance |
| Timeline |
| American Superconductor |
| Cummins |
American Superconductor and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Superconductor and Cummins
The main advantage of trading using opposite American Superconductor and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Superconductor position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| American Superconductor vs. Nel ASA | American Superconductor vs. Graham | American Superconductor vs. Watts Water Technologies | American Superconductor vs. CVD Equipment |
| Cummins vs. Flowserve | Cummins vs. Franklin Electric Co | Cummins vs. Watts Water Technologies | Cummins vs. Gorman Rupp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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