Correlation Between American Vanguard and Cyclo Therapeutics

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

By analyzing existing cross correlation between American Vanguard and Cyclo Therapeutics, you can compare the effects of market volatilities on American Vanguard and Cyclo Therapeutics 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 Cyclo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Vanguard and Cyclo Therapeutics.

Diversification Opportunities for American Vanguard and Cyclo Therapeutics

0.28

Correlation Coefficient

American Vanguard  Cyclo Therapeutics

Modest diversification

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

Pair Corralation between American Vanguard and Cyclo Therapeutics

Considering the 90-day investment horizon American Vanguard is expected to under-perform the Cyclo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, American Vanguard is 1.6 times less risky than Cyclo Therapeutics. The stock trades about -0.34 of its potential returns per unit of risk. The Cyclo Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Cyclo Therapeutics on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Cyclo Therapeutics or generate 6.45% return on investment over 90 days.

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

American Vanguard  vs.  Cyclo Therapeutics

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cyclo Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyclo Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cyclo Therapeutics is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with American Vanguard and Cyclo Therapeutics

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

The idea behind American Vanguard and Cyclo Therapeutics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.