Correlation Between Central Asia and Ameriprise Financial

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

By analyzing existing cross correlation between Central Asia Metals and Ameriprise Financial, you can compare the effects of market volatilities on Central Asia and Ameriprise Financial 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 Central Asia with a short position of Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Ameriprise Financial.

Diversification Opportunities for Central Asia and Ameriprise Financial

0.03

Correlation Coefficient

Central Asia  Ameriprise Financial

Significant diversification

The 3 months correlation between Central and Ameriprise is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and Central Asia 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 Central Asia Metals are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Central Asia i.e., Central Asia and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Central Asia and Ameriprise Financial

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Ameriprise Financial. In addition to that, Central Asia is 1.16 times more volatile than Ameriprise Financial. It trades about -0.05 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about -0.06 per unit of volatility. If you would invest  56,381  in Ameriprise Financial on December 1, 2024 and sell it today you would lose (3,284) from holding Ameriprise Financial or give up 5.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Central Asia Metals  vs.  Ameriprise Financial

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ameriprise Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Central Asia and Ameriprise Financial

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

The idea behind Central Asia Metals and Ameriprise Financial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.