Correlation Between Ameriprise Financial and FirstGroup Plc

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

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

Diversification Opportunities for Ameriprise Financial and FirstGroup Plc

-0.08

Correlation Coefficient

Ameriprise Financial  FirstGroup Plc

Good diversification

The 3 months correlation between Ameriprise and FirstGroup is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and FirstGroup Plc go up and down completely randomly.

Pair Corralation between Ameriprise Financial and FirstGroup Plc

Assuming the 90 days horizon Ameriprise Financial is expected to generate 1.04 times more return on investment than FirstGroup Plc. However, Ameriprise Financial is 1.04 times more volatile than FirstGroup plc. It trades about 0.24 of its potential returns per unit of risk. FirstGroup plc is currently generating about 0.03 per unit of risk. If you would invest  39,275  in Ameriprise Financial on September 9, 2024 and sell it today you would earn a total of  13,725  from holding Ameriprise Financial or generate 34.95% return on investment over 90 days.

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

Ameriprise Financial  vs.  FirstGroup plc

Ameriprise Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

FirstGroup plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FirstGroup Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ameriprise Financial and FirstGroup Plc

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

The idea behind Ameriprise Financial and FirstGroup plc 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.

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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.