Correlation Between American Sierra and American Creek

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

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

Diversification Opportunities for American Sierra and American Creek

0.24

Correlation Coefficient

American Sierra  American Creek

Modest diversification

The 3 months correlation between American and American is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Sierra Gold and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources and American Sierra 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 Sierra Gold are associated (or correlated) with American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of American Sierra i.e., American Sierra and American Creek go up and down completely randomly.

Pair Corralation between American Sierra and American Creek

Given the investment horizon of 90 days American Sierra Gold is expected to generate 2.83 times more return on investment than American Creek. However, American Sierra is 2.83 times more volatile than American Creek Resources. It trades about 0.07 of its potential returns per unit of risk. American Creek Resources is currently generating about -0.16 per unit of risk. If you would invest  0.50  in American Sierra Gold on December 30, 2024 and sell it today you would lose (0.07) from holding American Sierra Gold or give up 14.0% of portfolio value over 90 days.

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

American Sierra Gold  vs.  American Creek Resources

American Sierra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

American Creek Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Creek Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Sierra and American Creek

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

The idea behind American Sierra Gold and American Creek Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.