Correlation Between American Superconductor and Amaero International

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

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

Diversification Opportunities for American Superconductor and Amaero International

0.74

Correlation Coefficient

American Superconductor  Amaero International

Poor diversification

The 3 months correlation between American and Amaero is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and Amaero International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaero International and American Superconductor 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 Superconductor are associated (or correlated) with Amaero International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaero International has no effect on the direction of American Superconductor i.e., American Superconductor and Amaero International go up and down completely randomly.

Pair Corralation between American Superconductor and Amaero International

Given the investment horizon of 90 days American Superconductor is expected to under-perform the Amaero International. But the stock apears to be less risky and, when comparing its historical volatility, American Superconductor is 1.4 times less risky than Amaero International. The stock trades about -0.04 of its potential returns per unit of risk. The Amaero International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Amaero International on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Amaero International or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

American Superconductor  vs.  Amaero International

American Superconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Superconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Amaero International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amaero International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Amaero International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Superconductor and Amaero International

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

The idea behind American Superconductor and Amaero International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.