Correlation Between E I and American Vanguard
Can any of the company-specific risk be diversified away by investing in both E I and American Vanguard 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 E I and American Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E I du and American Vanguard, you can compare the effects of market volatilities on E I and American Vanguard 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 E I with a short position of American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of E I and American Vanguard.
Diversification Opportunities for E I and American Vanguard
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CTA-PB and American is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding E I du and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard and E I 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 E I du are associated (or correlated) with American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of E I i.e., E I and American Vanguard go up and down completely randomly.
Pair Corralation between E I and American Vanguard
Assuming the 90 days trading horizon E I du is expected to under-perform the American Vanguard. But the preferred stock apears to be less risky and, when comparing its historical volatility, E I du is 2.8 times less risky than American Vanguard. The preferred stock trades about -0.11 of its potential returns per unit of risk. The American Vanguard is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 542.00 in American Vanguard on August 27, 2024 and sell it today you would earn a total of 40.00 from holding American Vanguard or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E I du vs. American Vanguard
Performance |
| Timeline |
| E I du |
| American Vanguard |
E I and American Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E I and American Vanguard
The main advantage of trading using opposite E I and American Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E I position performs unexpectedly, American Vanguard 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 Vanguard will offset losses from the drop in American Vanguard's long position.The idea behind E I du and American Vanguard pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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