Correlation Between Atlantic Energy and American Defense

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

By analyzing existing cross correlation between Atlantic Energy Solutions and American Defense Systems, you can compare the effects of market volatilities on Atlantic Energy and American Defense 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 Atlantic Energy with a short position of American Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlantic Energy and American Defense.

Diversification Opportunities for Atlantic Energy and American Defense

0.0

Correlation Coefficient

Atlantic Energy  American Defense

Pay attention - limited upside

The 3 months correlation between Atlantic and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Energy Solutions and American Defense Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Defense Systems and Atlantic Energy 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 Atlantic Energy Solutions are associated (or correlated) with American Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Defense Systems has no effect on the direction of Atlantic Energy i.e., Atlantic Energy and American Defense go up and down completely randomly.

Pair Corralation between Atlantic Energy and American Defense

If you would invest  0.85  in Atlantic Energy Solutions on December 22, 2024 and sell it today you would earn a total of  0.84  from holding Atlantic Energy Solutions or generate 98.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Atlantic Energy Solutions  vs.  American Defense Systems

Atlantic Energy Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Energy Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Atlantic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

American Defense Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Defense Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, American Defense is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Atlantic Energy and American Defense

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

The idea behind Atlantic Energy Solutions and American Defense 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.