Correlation Between Ameriprise Financial and Transocean

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

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

Diversification Opportunities for Ameriprise Financial and Transocean

0.77

Correlation Coefficient

Ameriprise Financial  Transocean

Poor diversification

The 3 months correlation between Ameriprise and Transocean is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Transocean go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Transocean

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.37 times more return on investment than Transocean. However, Ameriprise Financial is 2.72 times less risky than Transocean. It trades about -0.08 of its potential returns per unit of risk. Transocean is currently generating about -0.03 per unit of risk. If you would invest  1,095,700  in Ameriprise Financial on December 25, 2024 and sell it today you would lose (94,809) from holding Ameriprise Financial or give up 8.65% of portfolio value over 90 days.

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

Ameriprise Financial  vs.  Transocean

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ameriprise Financial and Transocean

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

The idea behind Ameriprise Financial and Transocean 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.