Correlation Between Ami Organics and Thomas Scott

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

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

Diversification Opportunities for Ami Organics and Thomas Scott

0.42

Correlation Coefficient

Ami Organics  Thomas Scott

Very weak diversification

The 3 months correlation between Ami and Thomas is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ami Organics Limited and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott Limited and Ami Organics 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 Ami Organics Limited are associated (or correlated) with Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Ami Organics i.e., Ami Organics and Thomas Scott go up and down completely randomly.

Pair Corralation between Ami Organics and Thomas Scott

Assuming the 90 days trading horizon Ami Organics Limited is expected to under-perform the Thomas Scott. But the stock apears to be less risky and, when comparing its historical volatility, Ami Organics Limited is 1.09 times less risky than Thomas Scott. The stock trades about -0.15 of its potential returns per unit of risk. The Thomas Scott Limited is currently generating about 0.85 of returns per unit of risk over similar time horizon. If you would invest  29,389  in Thomas Scott Limited on October 8, 2024 and sell it today you would earn a total of  18,581  from holding Thomas Scott Limited or generate 63.22% return on investment over 90 days.

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

Ami Organics Limited  vs.  Thomas Scott Limited

Ami Organics Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

Thomas Scott Limited

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ami Organics and Thomas Scott

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

The idea behind Ami Organics Limited and Thomas Scott Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.