Correlation Between American West and Nine Entertainment
Can any of the company-specific risk be diversified away by investing in both American West and Nine Entertainment 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 Nine Entertainment 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 Nine Entertainment Co, you can compare the effects of market volatilities on American West and Nine Entertainment 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 Nine Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Nine Entertainment.
Diversification Opportunities for American West and Nine Entertainment
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Nine is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and Nine Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Entertainment 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 Nine Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Entertainment has no effect on the direction of American West i.e., American West and Nine Entertainment go up and down completely randomly.
Pair Corralation between American West and Nine Entertainment
Assuming the 90 days trading horizon American West Metals is expected to under-perform the Nine Entertainment. In addition to that, American West is 1.91 times more volatile than Nine Entertainment Co. It trades about -0.4 of its total potential returns per unit of risk. Nine Entertainment Co is currently generating about 0.25 per unit of volatility. If you would invest 114.00 in Nine Entertainment Co on September 3, 2024 and sell it today you would earn a total of 11.00 from holding Nine Entertainment Co or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Nine Entertainment Co
Performance |
| Timeline |
| American West Metals |
| Nine Entertainment |
American West and Nine Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Nine Entertainment
The main advantage of trading using opposite American West and Nine Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West position performs unexpectedly, Nine Entertainment 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 Nine Entertainment will offset losses from the drop in Nine Entertainment's long position.| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Aneka Tambang Tbk |
| Nine Entertainment vs. Encounter Resources | Nine Entertainment vs. Tlou Energy | Nine Entertainment vs. Superior Resources | Nine Entertainment vs. Peel Mining |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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