Correlation Between M3 and American Well
Can any of the company-specific risk be diversified away by investing in both M3 and American Well 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 M3 and American Well into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Inc and American Well Corp, you can compare the effects of market volatilities on M3 and American Well 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 M3 with a short position of American Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and American Well.
Diversification Opportunities for M3 and American Well
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between M3 and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and American Well Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Well Corp and M3 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 M3 Inc are associated (or correlated) with American Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Well Corp has no effect on the direction of M3 i.e., M3 and American Well go up and down completely randomly.
Pair Corralation between M3 and American Well
Assuming the 90 days horizon M3 Inc is expected to generate 0.43 times more return on investment than American Well. However, M3 Inc is 2.31 times less risky than American Well. It trades about -0.07 of its potential returns per unit of risk. American Well Corp is currently generating about -0.03 per unit of risk. If you would invest 989.00 in M3 Inc on August 29, 2024 and sell it today you would lose (510.00) from holding M3 Inc or give up 51.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M3 Inc vs. American Well Corp
Performance |
| Timeline |
| M3 Inc |
| American Well Corp |
M3 and American Well Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M3 and American Well
The main advantage of trading using opposite M3 and American Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, American Well 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 Well will offset losses from the drop in American Well's long position.The idea behind M3 Inc and American Well Corp 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.| American Well vs. Doximity | American Well vs. Certara | American Well vs. Teladoc | American Well vs. Definitive Healthcare Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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