Correlation Between Continental and American Rebel

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

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

Diversification Opportunities for Continental and American Rebel

0.37

Correlation Coefficient

Continental  American Rebel

Weak diversification

The 3 months correlation between Continental and American is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and American Rebel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rebel Holdings and Continental 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 Caleres are associated (or correlated) with American Rebel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rebel Holdings has no effect on the direction of Continental i.e., Continental and American Rebel go up and down completely randomly.

Pair Corralation between Continental and American Rebel

Considering the 90-day investment horizon Caleres is expected to under-perform the American Rebel. But the stock apears to be less risky and, when comparing its historical volatility, Caleres is 39.36 times less risky than American Rebel. The stock trades about -0.1 of its potential returns per unit of risk. The American Rebel Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.50  in American Rebel Holdings on September 3, 2024 and sell it today you would lose (0.68) from holding American Rebel Holdings or give up 45.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

Caleres  vs.  American Rebel Holdings

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

American Rebel Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Rebel Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, American Rebel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Continental and American Rebel

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

The idea behind Caleres and American Rebel Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.