Correlation Between Deluxe and American Environmental

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

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

Diversification Opportunities for Deluxe and American Environmental

0.0

Correlation Coefficient

Deluxe  American Environmental

Pay attention - limited upside

The 3 months correlation between Deluxe and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and American Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Environmental and Deluxe 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 Deluxe are associated (or correlated) with American Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Environmental has no effect on the direction of Deluxe i.e., Deluxe and American Environmental go up and down completely randomly.

Pair Corralation between Deluxe and American Environmental

If you would invest  1,873  in Deluxe on October 8, 2024 and sell it today you would earn a total of  394.00  from holding Deluxe or generate 21.04% return on investment over 90 days.

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

Deluxe  vs.  American Environmental

Deluxe

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

American Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Deluxe and American Environmental

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

The idea behind Deluxe and American Environmental 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.