Correlation Between American Films and AMC Entertainment

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

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

Diversification Opportunities for American Films and AMC Entertainment

0.43

Correlation Coefficient

American Films  AMC Entertainment

Very weak diversification

The 3 months correlation between American and AMC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Films and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and American Films 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 Films are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of American Films i.e., American Films and AMC Entertainment go up and down completely randomly.

Pair Corralation between American Films and AMC Entertainment

Given the investment horizon of 90 days American Films is expected to generate 2.67 times more return on investment than AMC Entertainment. However, American Films is 2.67 times more volatile than AMC Entertainment Holdings. It trades about 0.06 of its potential returns per unit of risk. AMC Entertainment Holdings is currently generating about 0.03 per unit of risk. If you would invest  25.00  in American Films on October 10, 2024 and sell it today you would lose (16.53) from holding American Films or give up 66.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

American Films  vs.  AMC Entertainment Holdings

American Films

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Films are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, American Films disclosed solid returns over the last few months and may actually be approaching a breakup point.

AMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Films and AMC Entertainment

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

The idea behind American Films and AMC Entertainment Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.