Correlation Between All American and National Stock

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

By analyzing existing cross correlation between All American Pet and National Stock Yards, you can compare the effects of market volatilities on All American and National Stock 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 National Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and National Stock.

Diversification Opportunities for All American and National Stock

0.15

Correlation Coefficient

All American  National Stock

Average diversification

The 3 months correlation between All and National is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and National Stock Yards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Stock Yards 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 Pet are associated (or correlated) with National Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Stock Yards has no effect on the direction of All American i.e., All American and National Stock go up and down completely randomly.

Pair Corralation between All American and National Stock

Given the investment horizon of 90 days All American Pet is expected to under-perform the National Stock. In addition to that, All American is 22.6 times more volatile than National Stock Yards. It trades about -0.24 of its total potential returns per unit of risk. National Stock Yards is currently generating about 0.09 per unit of volatility. If you would invest  30,500  in National Stock Yards on October 25, 2024 and sell it today you would earn a total of  500.00  from holding National Stock Yards or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

All American Pet  vs.  National Stock Yards

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

National Stock Yards

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Stock Yards are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, National Stock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with All American and National Stock

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

The idea behind All American Pet and National Stock Yards 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.