Correlation Between Morningstar Unconstrained and American Superconductor

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

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

Diversification Opportunities for Morningstar Unconstrained and American Superconductor

0.41

Correlation Coefficient

Morningstar Unconstrained  American Superconductor

Very weak diversification

The 3 months correlation between Morningstar and American is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and Morningstar Unconstrained 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 Morningstar Unconstrained Allocation are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of Morningstar Unconstrained i.e., Morningstar Unconstrained and American Superconductor go up and down completely randomly.

Pair Corralation between Morningstar Unconstrained and American Superconductor

Assuming the 90 days horizon Morningstar Unconstrained Allocation is expected to generate 0.15 times more return on investment than American Superconductor. However, Morningstar Unconstrained Allocation is 6.6 times less risky than American Superconductor. It trades about -0.13 of its potential returns per unit of risk. American Superconductor is currently generating about -0.12 per unit of risk. If you would invest  1,169  in Morningstar Unconstrained Allocation on December 4, 2024 and sell it today you would lose (88.00) from holding Morningstar Unconstrained Allocation or give up 7.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Morningstar Unconstrained Allo  vs.  American Superconductor

Morningstar Unconstrained

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morningstar Unconstrained Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Superconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Superconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Morningstar Unconstrained and American Superconductor

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

The idea behind Morningstar Unconstrained Allocation and American Superconductor 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .