Correlation Between Amaero International and Amada

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

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

Diversification Opportunities for Amaero International and Amada

-0.1

Correlation Coefficient

Amaero International  Amada

Good diversification

The 3 months correlation between Amaero and Amada is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Amaero International and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada and Amaero International 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 Amaero International are associated (or correlated) with Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of Amaero International i.e., Amaero International and Amada go up and down completely randomly.

Pair Corralation between Amaero International and Amada

Assuming the 90 days horizon Amaero International is expected to generate 0.17 times more return on investment than Amada. However, Amaero International is 5.98 times less risky than Amada. It trades about -0.16 of its potential returns per unit of risk. Amada Co is currently generating about -0.13 per unit of risk. If you would invest  26.00  in Amaero International on September 14, 2024 and sell it today you would lose (8.00) from holding Amaero International or give up 30.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Amaero International  vs.  Amada Co

Amaero International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amaero International 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amada Co 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Amaero International and Amada

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

The idea behind Amaero International and Amada Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.