Correlation Between All American and Institute

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

By analyzing existing cross correlation between All American Gld and Institute of Biomedical, you can compare the effects of market volatilities on All American and Institute 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 All American with a short position of Institute. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and Institute.

Diversification Opportunities for All American and Institute

0.81

Correlation Coefficient

All American  Institute

Very poor diversification

The 3 months correlation between All and Institute is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding All American Gld and Institute of Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Institute of Biomedical and All American 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 All American Gld are associated (or correlated) with Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Institute of Biomedical has no effect on the direction of All American i.e., All American and Institute go up and down completely randomly.

Pair Corralation between All American and Institute

Given the investment horizon of 90 days All American is expected to generate 2.1 times less return on investment than Institute. In addition to that, All American is 1.12 times more volatile than Institute of Biomedical. It trades about 0.13 of its total potential returns per unit of risk. Institute of Biomedical is currently generating about 0.32 per unit of volatility. If you would invest  1.45  in Institute of Biomedical on October 26, 2024 and sell it today you would earn a total of  1.25  from holding Institute of Biomedical or generate 86.21% return on investment over 90 days.

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

All American Gld  vs.  Institute of Biomedical

All American Gld

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in All American Gld are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, All American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Institute of Biomedical

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Institute of Biomedical are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Institute unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with All American and Institute

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

The idea behind All American Gld and Institute of Biomedical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.