Correlation Between Common Stock and Americafirst Monthly

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

By analyzing existing cross correlation between Common Stock Fund and Americafirst Monthly Risk On, you can compare the effects of market volatilities on Common Stock and Americafirst Monthly 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 Common Stock with a short position of Americafirst Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Common Stock and Americafirst Monthly.

Diversification Opportunities for Common Stock and Americafirst Monthly

0.55

Correlation Coefficient

Common Stock  Americafirst Monthly

Very weak diversification

The 3 months correlation between Common and Americafirst is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Common Stock Fund and Americafirst Monthly Risk On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Monthly and Common Stock 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 Common Stock Fund are associated (or correlated) with Americafirst Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Monthly has no effect on the direction of Common Stock i.e., Common Stock and Americafirst Monthly go up and down completely randomly.

Pair Corralation between Common Stock and Americafirst Monthly

Assuming the 90 days horizon Common Stock Fund is expected to generate 0.72 times more return on investment than Americafirst Monthly. However, Common Stock Fund is 1.39 times less risky than Americafirst Monthly. It trades about -0.07 of its potential returns per unit of risk. Americafirst Monthly Risk On is currently generating about -0.05 per unit of risk. If you would invest  3,742  in Common Stock Fund on December 24, 2024 and sell it today you would lose (158.00) from holding Common Stock Fund or give up 4.22% of portfolio value over 90 days.

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

Common Stock Fund  vs.  Americafirst Monthly Risk On

Common Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Common Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Common Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Americafirst Monthly

Risk-Adjusted Performance

Very Weak

Over the last 90 days Americafirst Monthly Risk On has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Americafirst Monthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Common Stock and Americafirst Monthly

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

The idea behind Common Stock Fund and Americafirst Monthly Risk On 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.