Correlation Between American West and Carlton Investments
Can any of the company-specific risk be diversified away by investing in both American West and Carlton Investments 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 West and Carlton Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American West Metals and Carlton Investments, you can compare the effects of market volatilities on American West and Carlton Investments 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 West with a short position of Carlton Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Carlton Investments.
Diversification Opportunities for American West and Carlton Investments
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Carlton is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and Carlton Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlton Investments and American West 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 West Metals are associated (or correlated) with Carlton Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlton Investments has no effect on the direction of American West i.e., American West and Carlton Investments go up and down completely randomly.
Pair Corralation between American West and Carlton Investments
Assuming the 90 days trading horizon American West Metals is expected to generate 8.33 times more return on investment than Carlton Investments. However, American West is 8.33 times more volatile than Carlton Investments. It trades about 0.03 of its potential returns per unit of risk. Carlton Investments is currently generating about 0.03 per unit of risk. If you would invest 4.90 in American West Metals on November 27, 2024 and sell it today you would lose (0.50) from holding American West Metals or give up 10.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Carlton Investments
Performance |
| Timeline |
| American West Metals |
| Carlton Investments |
American West and Carlton Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Carlton Investments
The main advantage of trading using opposite American West and Carlton Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West position performs unexpectedly, Carlton Investments 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 Carlton Investments will offset losses from the drop in Carlton Investments' long position.| American West vs. Computershare | American West vs. High Tech Metals | American West vs. Technology One | American West vs. Hansen Technologies |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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