Correlation Between American Outdoor and Thor Industries
Can any of the company-specific risk be diversified away by investing in both American Outdoor and Thor Industries 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 Thor Industries 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 Thor Industries, you can compare the effects of market volatilities on American Outdoor and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Outdoor and Thor Industries.
Diversification Opportunities for American Outdoor and Thor Industries
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Thor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Outdoor Brands and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of American Outdoor i.e., American Outdoor and Thor Industries go up and down completely randomly.
Pair Corralation between American Outdoor and Thor Industries
Given the investment horizon of 90 days American Outdoor Brands is expected to generate 1.15 times more return on investment than Thor Industries. However, American Outdoor is 1.15 times more volatile than Thor Industries. It trades about 0.04 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 per unit of risk. If you would invest 771.00 in American Outdoor Brands on September 2, 2024 and sell it today you would earn a total of 210.00 from holding American Outdoor Brands or generate 27.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Outdoor Brands vs. Thor Industries
Performance |
| Timeline |
| American Outdoor Brands |
| Thor Industries |
American Outdoor and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Outdoor and Thor Industries
The main advantage of trading using opposite American Outdoor and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Outdoor position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.| American Outdoor vs. Clarus Corp | American Outdoor vs. Escalade Incorporated | American Outdoor vs. Johnson Outdoors | American Outdoor vs. JAKKS Pacific |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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