Correlation Between Four Leaf and American Leisure

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

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

Diversification Opportunities for Four Leaf and American Leisure

-0.3

Correlation Coefficient

Four Leaf  American Leisure

Very good diversification

The 3 months correlation between Four and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and American Leisure Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Leisure Holdings and Four Leaf 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 Four Leaf Acquisition are associated (or correlated) with American Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Leisure Holdings has no effect on the direction of Four Leaf i.e., Four Leaf and American Leisure go up and down completely randomly.

Pair Corralation between Four Leaf and American Leisure

Given the investment horizon of 90 days Four Leaf is expected to generate 285.7 times less return on investment than American Leisure. But when comparing it to its historical volatility, Four Leaf Acquisition is 177.91 times less risky than American Leisure. It trades about 0.09 of its potential returns per unit of risk. American Leisure Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.03  in American Leisure Holdings on October 22, 2024 and sell it today you would lose (0.02) from holding American Leisure Holdings or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.08%
Values	Daily Returns

Four Leaf Acquisition  vs.  American Leisure Holdings

Four Leaf Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

American Leisure Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Leisure Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, American Leisure demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Four Leaf and American Leisure

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

The idea behind Four Leaf Acquisition and American Leisure Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.