Correlation Between American Woodmark and T MOBILE

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

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

Diversification Opportunities for American Woodmark and T MOBILE

0.36

Correlation Coefficient

American Woodmark  T MOBILE

Weak diversification

The 3 months correlation between American and TM5 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Woodmark and T MOBILE US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE US and American Woodmark 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 Woodmark are associated (or correlated) with T MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE US has no effect on the direction of American Woodmark i.e., American Woodmark and T MOBILE go up and down completely randomly.

Pair Corralation between American Woodmark and T MOBILE

Assuming the 90 days horizon American Woodmark is expected to under-perform the T MOBILE. In addition to that, American Woodmark is 1.3 times more volatile than T MOBILE US. It trades about -0.06 of its total potential returns per unit of risk. T MOBILE US is currently generating about 0.02 per unit of volatility. If you would invest  20,886  in T MOBILE US on October 25, 2024 and sell it today you would earn a total of  204.00  from holding T MOBILE US or generate 0.98% return on investment over 90 days.

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

American Woodmark  vs.  T MOBILE US

American Woodmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Woodmark 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.

T MOBILE US

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, T MOBILE 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 American Woodmark and T MOBILE

The main advantage of trading using opposite American Woodmark and T MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Woodmark position performs unexpectedly, T MOBILE 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 T MOBILE will offset losses from the drop in T MOBILE's long position.

The idea behind American Woodmark and T MOBILE US 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.