Correlation Between Aterian and American Woodmark

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

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

Diversification Opportunities for Aterian and American Woodmark

0.26

Correlation Coefficient

Aterian  American Woodmark

Modest diversification

The 3 months correlation between Aterian and American is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aterian and American Woodmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Woodmark and Aterian 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 Aterian are associated (or correlated) with American Woodmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Woodmark has no effect on the direction of Aterian i.e., Aterian and American Woodmark go up and down completely randomly.

Pair Corralation between Aterian and American Woodmark

Given the investment horizon of 90 days Aterian is expected to generate 2.72 times more return on investment than American Woodmark. However, Aterian is 2.72 times more volatile than American Woodmark. It trades about 0.0 of its potential returns per unit of risk. American Woodmark is currently generating about -0.19 per unit of risk. If you would invest  255.00  in Aterian on December 29, 2024 and sell it today you would lose (25.00) from holding Aterian or give up 9.8% of portfolio value over 90 days.

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

Aterian  vs.  American Woodmark

Aterian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Aterian is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

American Woodmark

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Woodmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aterian and American Woodmark

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

The idea behind Aterian and American Woodmark 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.