Correlation Between Character and American Outdoor
Can any of the company-specific risk be diversified away by investing in both Character and American Outdoor 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 Character and American Outdoor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Character Group and American Outdoor Brands, you can compare the effects of market volatilities on Character and American Outdoor 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 Character with a short position of American Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Character and American Outdoor.
Diversification Opportunities for Character and American Outdoor
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Character and American is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Character Group and American Outdoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Outdoor Brands and Character 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 The Character Group are associated (or correlated) with American Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Outdoor Brands has no effect on the direction of Character i.e., Character and American Outdoor go up and down completely randomly.
Pair Corralation between Character and American Outdoor
Assuming the 90 days horizon Character is expected to generate 22.27 times less return on investment than American Outdoor. But when comparing it to its historical volatility, The Character Group is 51.82 times less risky than American Outdoor. It trades about 0.15 of its potential returns per unit of risk. American Outdoor Brands is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 922.00 in American Outdoor Brands on August 31, 2024 and sell it today you would earn a total of 53.00 from holding American Outdoor Brands or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Character Group vs. American Outdoor Brands
Performance |
| Timeline |
| Character Group |
| American Outdoor Brands |
Character and American Outdoor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Character and American Outdoor
The main advantage of trading using opposite Character and American Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Character position performs unexpectedly, American Outdoor 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 Outdoor will offset losses from the drop in American Outdoor's long position.| Character vs. American Outdoor Brands | Character vs. Clarus Corp | Character vs. Escalade Incorporated | Character vs. Johnson Outdoors |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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