Correlation Between Austin Engineering and American Premium

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

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

Diversification Opportunities for Austin Engineering and American Premium

0.2

Correlation Coefficient

Austin Engineering  American Premium

Modest diversification

The 3 months correlation between Austin and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and American Premium Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Premium Water and Austin Engineering 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 Austin Engineering Limited are associated (or correlated) with American Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Premium Water has no effect on the direction of Austin Engineering i.e., Austin Engineering and American Premium go up and down completely randomly.

Pair Corralation between Austin Engineering and American Premium

Assuming the 90 days horizon Austin Engineering Limited is expected to under-perform the American Premium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Austin Engineering Limited is 26.16 times less risky than American Premium. The pink sheet trades about -0.1 of its potential returns per unit of risk. The American Premium Water is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in American Premium Water on December 30, 2024 and sell it today you would earn a total of  0.00  from holding American Premium Water or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.15%
Values	Daily Returns

Austin Engineering Limited  vs.  American Premium Water

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.

American Premium Water

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austin Engineering and American Premium

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

The idea behind Austin Engineering Limited and American Premium Water 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.