Correlation Between Ameriprise Financial and Vestas Wind

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

By analyzing existing cross correlation between Ameriprise Financial and Vestas Wind Systems, you can compare the effects of market volatilities on Ameriprise Financial and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Vestas Wind.

Diversification Opportunities for Ameriprise Financial and Vestas Wind

-0.62

Correlation Coefficient

Ameriprise Financial  Vestas Wind

Excellent diversification

The 3 months correlation between Ameriprise and Vestas is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Vestas Wind go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Vestas Wind

Assuming the 90 days horizon Ameriprise Financial is expected to under-perform the Vestas Wind. But the stock apears to be less risky and, when comparing its historical volatility, Ameriprise Financial is 1.69 times less risky than Vestas Wind. The stock trades about -0.1 of its potential returns per unit of risk. The Vestas Wind Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Vestas Wind Systems on December 24, 2024 and sell it today you would earn a total of  160.00  from holding Vestas Wind Systems or generate 12.2% return on investment over 90 days.

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

Ameriprise Financial  vs.  Vestas Wind Systems

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Vestas Wind Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vestas Wind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and Vestas Wind

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

The idea behind Ameriprise Financial and Vestas Wind Systems 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.