Correlation Between AMODW and Broad Capital

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

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

Diversification Opportunities for AMODW and Broad Capital

0.02

Correlation Coefficient

AMODW  Broad Capital

Significant diversification

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

Pair Corralation between AMODW and Broad Capital

Assuming the 90 days horizon AMODW is expected to generate 7.01 times more return on investment than Broad Capital. However, AMODW is 7.01 times more volatile than Broad Capital Acquisition. It trades about 0.2 of its potential returns per unit of risk. Broad Capital Acquisition is currently generating about -0.28 per unit of risk. If you would invest  5.60  in AMODW on October 6, 2024 and sell it today you would earn a total of  2.40  from holding AMODW or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.54%
Values	Daily Returns

AMODW  vs.  Broad Capital Acquisition

AMODW

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMODW are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, AMODW showed solid returns over the last few months and may actually be approaching a breakup point.

Broad Capital Acquisition

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Broad Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak fundamental indicators, Broad Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMODW and Broad Capital

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

The idea behind AMODW and Broad Capital Acquisition 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.