Correlation Between Albemarle and American Vanguard

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

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

Diversification Opportunities for Albemarle and American Vanguard

-0.02

Correlation Coefficient

Albemarle  American Vanguard

Good diversification

The 3 months correlation between Albemarle and American is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard and Albemarle 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 Albemarle are associated (or correlated) with American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of Albemarle i.e., Albemarle and American Vanguard go up and down completely randomly.

Pair Corralation between Albemarle and American Vanguard

Assuming the 90 days trading horizon Albemarle is expected to under-perform the American Vanguard. But the stock apears to be less risky and, when comparing its historical volatility, Albemarle is 1.58 times less risky than American Vanguard. The stock trades about -0.04 of its potential returns per unit of risk. The American Vanguard is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  435.00  in American Vanguard on December 23, 2024 and sell it today you would earn a total of  19.00  from holding American Vanguard or generate 4.37% return on investment over 90 days.

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

Albemarle  vs.  American Vanguard

Albemarle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Albemarle is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

American Vanguard

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Vanguard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Albemarle and American Vanguard

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

The idea behind Albemarle and American Vanguard 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.