Correlation Between American Outdoor and Character
Can any of the company-specific risk be diversified away by investing in both American Outdoor and Character 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 Outdoor and Character into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Outdoor Brands and The Character Group, you can compare the effects of market volatilities on American Outdoor and Character 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 Outdoor with a short position of Character. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Outdoor and Character.
Diversification Opportunities for American Outdoor and Character
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Character is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Outdoor Brands and The Character Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Character Group and American Outdoor 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 Outdoor Brands are associated (or correlated) with Character. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Character Group has no effect on the direction of American Outdoor i.e., American Outdoor and Character go up and down completely randomly.
Pair Corralation between American Outdoor and Character
Given the investment horizon of 90 days American Outdoor Brands is expected to generate 39.95 times more return on investment than Character. However, American Outdoor is 39.95 times more volatile than The Character Group. It trades about 0.1 of its potential returns per unit of risk. The Character Group is currently generating about 0.21 per unit of risk. If you would invest 925.00 in American Outdoor Brands on August 31, 2024 and sell it today you would earn a total of 50.00 from holding American Outdoor Brands or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Outdoor Brands vs. The Character Group
Performance |
| Timeline |
| American Outdoor Brands |
| Character Group |
American Outdoor and Character Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Outdoor and Character
The main advantage of trading using opposite American Outdoor and Character positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Outdoor position performs unexpectedly, Character 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 Character will offset losses from the drop in Character's long position.| American Outdoor vs. Clarus Corp | American Outdoor vs. Escalade Incorporated | American Outdoor vs. Johnson Outdoors | American Outdoor vs. JAKKS Pacific |
| Character vs. American Outdoor Brands | Character vs. Clarus Corp | Character vs. Escalade Incorporated | Character vs. Johnson Outdoors |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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