Correlation Between American Premium and Alamo

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

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

Diversification Opportunities for American Premium and Alamo

0.19

Correlation Coefficient

American Premium  Alamo

Average diversification

The 3 months correlation between American and Alamo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding American Premium Water and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and American Premium 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 American Premium Water are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of American Premium i.e., American Premium and Alamo go up and down completely randomly.

Pair Corralation between American Premium and Alamo

Given the investment horizon of 90 days American Premium Water is expected to generate 95.2 times more return on investment than Alamo. However, American Premium is 95.2 times more volatile than Alamo Group. It trades about 0.12 of its potential returns per unit of risk. Alamo Group is currently generating about 0.01 per unit of risk. If you would invest  0.00  in American Premium Water on December 29, 2024 and sell it today you would earn a total of  0.00  from holding American Premium Water or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

American Premium Water  vs.  Alamo Group

American Premium Water

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Alamo Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Alamo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Premium and Alamo

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

The idea behind American Premium Water and Alamo Group 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 Stocks Directory module to find actively traded stocks across global markets.