Correlation Between Dupont De and American Superconductor

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

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

Diversification Opportunities for Dupont De and American Superconductor

-0.23

Correlation Coefficient

Dupont De  American Superconductor

Very good diversification

The 3 months correlation between Dupont and American is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and American Superconductor go up and down completely randomly.

Pair Corralation between Dupont De and American Superconductor

Allowing for the 90-day total investment horizon Dupont De is expected to generate 11.0 times less return on investment than American Superconductor. But when comparing it to its historical volatility, Dupont De Nemours is 4.58 times less risky than American Superconductor. It trades about 0.04 of its potential returns per unit of risk. American Superconductor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,168  in American Superconductor on September 12, 2024 and sell it today you would earn a total of  536.00  from holding American Superconductor or generate 24.72% return on investment over 90 days.

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

Dupont De Nemours  vs.  American Superconductor

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Dupont De and American Superconductor

The main advantage of trading using opposite Dupont De and American Superconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.