Correlation Between American Pwr and Amaero International

Can any of the company-specific risk be diversified away by investing in both American Pwr 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 Pwr 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 Pwr Group and Amaero International, you can compare the effects of market volatilities on American Pwr 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 Pwr with a short position of Amaero International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Pwr and Amaero International.

Diversification Opportunities for American Pwr and Amaero International

-0.14

Correlation Coefficient

American Pwr  Amaero International

Good diversification

The 3 months correlation between American and Amaero is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Pwr Group and Amaero International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaero International and American Pwr 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 Pwr Group 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 Pwr i.e., American Pwr and Amaero International go up and down completely randomly.

Pair Corralation between American Pwr and Amaero International

Given the investment horizon of 90 days American Pwr is expected to generate 1.18 times less return on investment than Amaero International. In addition to that, American Pwr is 1.28 times more volatile than Amaero International. It trades about 0.06 of its total potential returns per unit of risk. Amaero International is currently generating about 0.08 per unit of volatility. If you would invest  18.00  in Amaero International on December 30, 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 Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

American Pwr Group  vs.  Amaero International

American Pwr Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Pwr Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, American Pwr demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Amaero International

Risk-Adjusted Performance

Modest

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 fragile basic indicators, Amaero International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Pwr and Amaero International

The main advantage of trading using opposite American Pwr and Amaero International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Pwr 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 Pwr Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.