Correlation Between American Environmental and Belden

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

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

Diversification Opportunities for American Environmental and Belden

0.0

Correlation Coefficient

American Environmental  Belden

Pay attention - limited upside

The 3 months correlation between American and Belden is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Environmental and Belden Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belden Inc and American Environmental 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 Environmental are associated (or correlated) with Belden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belden Inc has no effect on the direction of American Environmental i.e., American Environmental and Belden go up and down completely randomly.

Pair Corralation between American Environmental and Belden

If you would invest  7,798  in Belden Inc on October 11, 2024 and sell it today you would earn a total of  3,797  from holding Belden Inc or generate 48.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Environmental  vs.  Belden Inc

American Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Environmental is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Belden Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Belden Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Environmental and Belden

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

The idea behind American Environmental and Belden Inc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.