Correlation Between Broad Capital and AMODW

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

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

Diversification Opportunities for Broad Capital and AMODW

0.02

Correlation Coefficient

Broad Capital  AMODW

Significant diversification

The 3 months correlation between Broad and AMODW is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Broad Capital Acquisition and AMODW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMODW and Broad Capital 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 Broad Capital Acquisition are associated (or correlated) with AMODW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMODW has no effect on the direction of Broad Capital i.e., Broad Capital and AMODW go up and down completely randomly.

Pair Corralation between Broad Capital and AMODW

Assuming the 90 days horizon Broad Capital Acquisition is expected to under-perform the AMODW. But the stock apears to be less risky and, when comparing its historical volatility, Broad Capital Acquisition is 7.01 times less risky than AMODW. The stock trades about -0.28 of its potential returns per unit of risk. The AMODW is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5.60  in AMODW on October 6, 2024 and sell it today you would earn a total of  2.40  from holding AMODW or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.54%
Values	Daily Returns

Broad Capital Acquisition  vs.  AMODW

Broad Capital Acquisition

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Broad Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak fundamental indicators, Broad Capital reported solid returns over the last few months and may actually be approaching a breakup point.

AMODW

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMODW are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, AMODW showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broad Capital and AMODW

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

The idea behind Broad Capital Acquisition and AMODW 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.