Correlation Between American Vanguard and Chemtrade Logistics

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

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

Diversification Opportunities for American Vanguard and Chemtrade Logistics

0.77

Correlation Coefficient

American Vanguard  Chemtrade Logistics

Poor diversification

The 3 months correlation between American and Chemtrade is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Vanguard and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and American Vanguard 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 Vanguard are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of American Vanguard i.e., American Vanguard and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between American Vanguard and Chemtrade Logistics

Considering the 90-day investment horizon American Vanguard is expected to generate 1.92 times more return on investment than Chemtrade Logistics. However, American Vanguard is 1.92 times more volatile than Chemtrade Logistics Income. It trades about 0.0 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about -0.08 per unit of risk. If you would invest  515.00  in American Vanguard on October 10, 2024 and sell it today you would lose (16.00) from holding American Vanguard or give up 3.11% of portfolio value over 90 days.

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

American Vanguard  vs.  Chemtrade Logistics Income

American Vanguard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Vanguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, American Vanguard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Vanguard and Chemtrade Logistics

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

The idea behind American Vanguard and Chemtrade Logistics Income 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.