Correlation Between American Outdoor and Nikon

Can any of the company-specific risk be diversified away by investing in both American Outdoor and Nikon 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 Nikon 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 Nikon, you can compare the effects of market volatilities on American Outdoor and Nikon 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 Nikon. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Outdoor and Nikon.

Diversification Opportunities for American Outdoor and Nikon

0.0

Correlation Coefficient

American Outdoor  Nikon

Pay attention - limited upside

The 3 months correlation between American and Nikon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Outdoor Brands and Nikon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon 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 Nikon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon has no effect on the direction of American Outdoor i.e., American Outdoor and Nikon go up and down completely randomly.

Pair Corralation between American Outdoor and Nikon

If you would invest  989.00  in American Outdoor Brands on December 3, 2024 and sell it today you would earn a total of  590.00  from holding American Outdoor Brands or generate 59.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

American Outdoor Brands  vs.  Nikon

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.

Nikon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nikon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nikon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Outdoor and Nikon

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

The idea behind American Outdoor Brands and Nikon 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.