Correlation Between American Outdoor and Escalade Incorporated

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

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

Diversification Opportunities for American Outdoor and Escalade Incorporated

0.09

Correlation Coefficient

American Outdoor  Escalade Incorporated

Significant diversification

The 3 months correlation between American and Escalade is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Outdoor Brands and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and American Outdoor 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 Outdoor Brands are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of American Outdoor i.e., American Outdoor and Escalade Incorporated go up and down completely randomly.

Pair Corralation between American Outdoor and Escalade Incorporated

Given the investment horizon of 90 days American Outdoor Brands is expected to generate 1.73 times more return on investment than Escalade Incorporated. However, American Outdoor is 1.73 times more volatile than Escalade Incorporated. It trades about 0.21 of its potential returns per unit of risk. Escalade Incorporated is currently generating about 0.05 per unit of risk. If you would invest  981.00  in American Outdoor Brands on November 28, 2024 and sell it today you would earn a total of  601.00  from holding American Outdoor Brands or generate 61.26% return on investment over 90 days.

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

American Outdoor Brands  vs.  Escalade Incorporated

American Outdoor Brands

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Outdoor Brands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, American Outdoor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Escalade Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with American Outdoor and Escalade Incorporated

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

The idea behind American Outdoor Brands and Escalade Incorporated 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..