Correlation Between Auto Trader and Ameriprise Financial

Can any of the company-specific risk be diversified away by investing in both Auto Trader and Ameriprise Financial 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 Auto Trader and Ameriprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auto Trader Group and Ameriprise Financial, you can compare the effects of market volatilities on Auto Trader and Ameriprise Financial 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 Auto Trader with a short position of Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Ameriprise Financial.

Diversification Opportunities for Auto Trader and Ameriprise Financial

-0.59

Correlation Coefficient

Auto Trader  Ameriprise Financial

Excellent diversification

The 3 months correlation between Auto and Ameriprise is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and Auto Trader 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 Auto Trader Group are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Auto Trader i.e., Auto Trader and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Auto Trader and Ameriprise Financial

Assuming the 90 days trading horizon Auto Trader is expected to generate 2.42 times less return on investment than Ameriprise Financial. In addition to that, Auto Trader is 1.1 times more volatile than Ameriprise Financial. It trades about 0.05 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.12 per unit of volatility. If you would invest  33,599  in Ameriprise Financial on October 9, 2024 and sell it today you would earn a total of  17,361  from holding Ameriprise Financial or generate 51.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Auto Trader Group  vs.  Ameriprise Financial

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ameriprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auto Trader and Ameriprise Financial

The main advantage of trading using opposite Auto Trader and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.

The idea behind Auto Trader Group and Ameriprise Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.