Correlation Between Arts Way and Austin Engineering

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

By analyzing existing cross correlation between Arts Way Manufacturing Co and Austin Engineering Limited, you can compare the effects of market volatilities on Arts Way and Austin Engineering 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 Arts Way with a short position of Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arts Way and Austin Engineering.

Diversification Opportunities for Arts Way and Austin Engineering

0.28

Correlation Coefficient

Arts Way  Austin Engineering

Modest diversification

The 3 months correlation between Arts and Austin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arts Way Manufacturing Co and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and Arts Way 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 Arts Way Manufacturing Co are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Arts Way i.e., Arts Way and Austin Engineering go up and down completely randomly.

Pair Corralation between Arts Way and Austin Engineering

Given the investment horizon of 90 days Arts Way Manufacturing Co is expected to under-perform the Austin Engineering. In addition to that, Arts Way is 1.15 times more volatile than Austin Engineering Limited. It trades about -0.17 of its total potential returns per unit of risk. Austin Engineering Limited is currently generating about -0.11 per unit of volatility. If you would invest  39.00  in Austin Engineering Limited on December 28, 2024 and sell it today you would lose (14.00) from holding Austin Engineering Limited or give up 35.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Arts Way Manufacturing Co  vs.  Austin Engineering Limited

Arts Way Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arts Way Manufacturing Co 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 fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arts Way and Austin Engineering

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

The idea behind Arts Way Manufacturing Co and Austin Engineering Limited 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.