Correlation Between Ama Marine and Applied DB

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

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

Diversification Opportunities for Ama Marine and Applied DB

0.7

Correlation Coefficient

Ama Marine  Applied DB

Poor diversification

The 3 months correlation between Ama and Applied is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ama Marine Public and Applied DB Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DB Public and Ama Marine 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 Ama Marine Public are associated (or correlated) with Applied DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DB Public has no effect on the direction of Ama Marine i.e., Ama Marine and Applied DB go up and down completely randomly.

Pair Corralation between Ama Marine and Applied DB

Assuming the 90 days trading horizon Ama Marine Public is expected to under-perform the Applied DB. But the stock apears to be less risky and, when comparing its historical volatility, Ama Marine Public is 4.6 times less risky than Applied DB. The stock trades about -0.18 of its potential returns per unit of risk. The Applied DB Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Applied DB Public on September 28, 2024 and sell it today you would lose (2.00) from holding Applied DB Public or give up 2.22% of portfolio value over 90 days.

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

Ama Marine Public  vs.  Applied DB Public

Ama Marine Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ama Marine Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ama Marine and Applied DB

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

The idea behind Ama Marine Public and Applied DB Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.