Correlation Between CVD Equipment and American Superconductor

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

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

Diversification Opportunities for CVD Equipment and American Superconductor

-0.35

Correlation Coefficient

CVD Equipment  American Superconductor

Very good diversification

The 3 months correlation between CVD and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CVD Equipment and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and CVD Equipment 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 CVD Equipment are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of CVD Equipment i.e., CVD Equipment and American Superconductor go up and down completely randomly.

Pair Corralation between CVD Equipment and American Superconductor

Considering the 90-day investment horizon CVD Equipment is expected to under-perform the American Superconductor. But the stock apears to be less risky and, when comparing its historical volatility, CVD Equipment is 1.84 times less risky than American Superconductor. The stock trades about -0.01 of its potential returns per unit of risk. The American Superconductor is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,592  in American Superconductor on September 12, 2024 and sell it today you would earn a total of  112.00  from holding American Superconductor or generate 4.32% return on investment over 90 days.

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

CVD Equipment  vs.  American Superconductor

CVD Equipment

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVD Equipment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVD Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

American Superconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Superconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Superconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVD Equipment and American Superconductor

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

The idea behind CVD Equipment and American Superconductor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.