Correlation Between American Diversified and Sack Lunch

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

By analyzing existing cross correlation between American Diversified Holdings and Sack Lunch Productions, you can compare the effects of market volatilities on American Diversified and Sack Lunch 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 American Diversified with a short position of Sack Lunch. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Diversified and Sack Lunch.

Diversification Opportunities for American Diversified and Sack Lunch

-0.15

Correlation Coefficient

American Diversified  Sack Lunch

Good diversification

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

Pair Corralation between American Diversified and Sack Lunch

Given the investment horizon of 90 days American Diversified Holdings is expected to under-perform the Sack Lunch. But the pink sheet apears to be less risky and, when comparing its historical volatility, American Diversified Holdings is 1.9 times less risky than Sack Lunch. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Sack Lunch Productions is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Sack Lunch Productions on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Sack Lunch Productions or generate 0.0% return on investment over 90 days.

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

American Diversified Holdings  vs.  Sack Lunch Productions

American Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, American Diversified is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sack Lunch Productions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sack Lunch Productions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Sack Lunch disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Diversified and Sack Lunch

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

The idea behind American Diversified Holdings and Sack Lunch Productions 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.