Correlation Between Ammo and Hexcel

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

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

Diversification Opportunities for Ammo and Hexcel

-0.06

Correlation Coefficient

Ammo  Hexcel

Good diversification

The 3 months correlation between Ammo and Hexcel is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ammo Inc and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel and Ammo 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 Ammo Inc are associated (or correlated) with Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Ammo i.e., Ammo and Hexcel go up and down completely randomly.

Pair Corralation between Ammo and Hexcel

Given the investment horizon of 90 days Ammo Inc is expected to under-perform the Hexcel. In addition to that, Ammo is 2.57 times more volatile than Hexcel. It trades about -0.07 of its total potential returns per unit of risk. Hexcel is currently generating about 0.1 per unit of volatility. If you would invest  6,016  in Hexcel on September 5, 2024 and sell it today you would earn a total of  515.00  from holding Hexcel or generate 8.56% return on investment over 90 days.

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

Ammo Inc  vs.  Hexcel

Ammo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ammo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hexcel

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ammo and Hexcel

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

The idea behind Ammo Inc and Hexcel 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.