Correlation Between Aptus Defined and American Customer

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

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

Diversification Opportunities for Aptus Defined and American Customer

0.6

Correlation Coefficient

Aptus Defined  American Customer

Poor diversification

The 3 months correlation between Aptus and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Defined Risk and American Customer Satisfaction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Customer and Aptus Defined 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 Aptus Defined Risk are associated (or correlated) with American Customer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Customer has no effect on the direction of Aptus Defined i.e., Aptus Defined and American Customer go up and down completely randomly.

Pair Corralation between Aptus Defined and American Customer

Given the investment horizon of 90 days Aptus Defined Risk is expected to generate 0.44 times more return on investment than American Customer. However, Aptus Defined Risk is 2.26 times less risky than American Customer. It trades about 0.16 of its potential returns per unit of risk. American Customer Satisfaction is currently generating about -0.18 per unit of risk. If you would invest  2,773  in Aptus Defined Risk on December 5, 2024 and sell it today you would earn a total of  42.00  from holding Aptus Defined Risk or generate 1.51% return on investment over 90 days.

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

Aptus Defined Risk  vs.  American Customer Satisfaction

Aptus Defined Risk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Defined Risk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Aptus Defined is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

American Customer

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Customer Satisfaction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, American Customer is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aptus Defined and American Customer

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

The idea behind Aptus Defined Risk and American Customer Satisfaction 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.