Correlation Between American Picture and American Films

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

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

Diversification Opportunities for American Picture and American Films

-0.05

Correlation Coefficient

American Picture  American Films

Good diversification

The 3 months correlation between American and American is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Picture House and American Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Films and American Picture 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 Picture House are associated (or correlated) with American Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Films has no effect on the direction of American Picture i.e., American Picture and American Films go up and down completely randomly.

Pair Corralation between American Picture and American Films

Given the investment horizon of 90 days American Picture is expected to generate 2.06 times less return on investment than American Films. But when comparing it to its historical volatility, American Picture House is 2.36 times less risky than American Films. It trades about 0.07 of its potential returns per unit of risk. American Films is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  17.00  in American Films on October 22, 2024 and sell it today you would lose (7.70) from holding American Films or give up 45.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

American Picture House  vs.  American Films

American Picture House

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Picture House are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, American Picture reported solid returns over the last few months and may actually be approaching a breakup point.

American Films

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Films are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, American Films disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Picture and American Films

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

The idea behind American Picture House and American Films 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.