Correlation Between AMCON Distributing and Dowlais Group

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

By analyzing existing cross correlation between AMCON Distributing and Dowlais Group plc, you can compare the effects of market volatilities on AMCON Distributing and Dowlais Group 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 AMCON Distributing with a short position of Dowlais Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMCON Distributing and Dowlais Group.

Diversification Opportunities for AMCON Distributing and Dowlais Group

0.09

Correlation Coefficient

AMCON Distributing  Dowlais Group

Significant diversification

The 3 months correlation between AMCON and Dowlais is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and Dowlais Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dowlais Group plc and AMCON Distributing 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 AMCON Distributing are associated (or correlated) with Dowlais Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dowlais Group plc has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and Dowlais Group go up and down completely randomly.

Pair Corralation between AMCON Distributing and Dowlais Group

Considering the 90-day investment horizon AMCON Distributing is expected to generate 0.74 times more return on investment than Dowlais Group. However, AMCON Distributing is 1.35 times less risky than Dowlais Group. It trades about 0.0 of its potential returns per unit of risk. Dowlais Group plc is currently generating about -0.01 per unit of risk. If you would invest  17,302  in AMCON Distributing on October 23, 2024 and sell it today you would lose (4,689) from holding AMCON Distributing or give up 27.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.92%
Values	Daily Returns

AMCON Distributing  vs.  Dowlais Group plc

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dowlais Group plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dowlais Group plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dowlais Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMCON Distributing and Dowlais Group

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

The idea behind AMCON Distributing and Dowlais Group plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.