Correlation Between Arts Way and American Premium
Can any of the company-specific risk be diversified away by investing in both Arts Way and American Premium 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 Arts Way and American Premium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arts Way Manufacturing Co and American Premium Water, you can compare the effects of market volatilities on Arts Way and American Premium 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 Arts Way with a short position of American Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arts Way and American Premium.
Diversification Opportunities for Arts Way and American Premium
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arts and American is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Arts Way Manufacturing Co and American Premium Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Premium Water and Arts Way 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 Arts Way Manufacturing Co are associated (or correlated) with American Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Premium Water has no effect on the direction of Arts Way i.e., Arts Way and American Premium go up and down completely randomly.
Pair Corralation between Arts Way and American Premium
Given the investment horizon of 90 days Arts Way is expected to generate 250.76 times less return on investment than American Premium. But when comparing it to its historical volatility, Arts Way Manufacturing Co is 120.94 times less risky than American Premium. It trades about 0.11 of its potential returns per unit of risk. American Premium Water is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 0.00 in American Premium Water on August 27, 2024 and sell it today you would earn a total of 0.01 from holding American Premium Water or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arts Way Manufacturing Co vs. American Premium Water
Performance |
| Timeline |
| Arts Way Manufacturing |
| American Premium Water |
Arts Way and American Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arts Way and American Premium
The main advantage of trading using opposite Arts Way and American Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arts Way position performs unexpectedly, American Premium 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 American Premium will offset losses from the drop in American Premium's long position.| Arts Way vs. First Tractor | Arts Way vs. Ag Growth International | Arts Way vs. AmeraMex International | Arts Way vs. American Premium Water |
| American Premium vs. First Tractor | American Premium vs. Ag Growth International | American Premium vs. AmeraMex International | American Premium vs. Arts Way Manufacturing Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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