Correlation Between Primoris Services and AMERICAN

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

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

Diversification Opportunities for Primoris Services and AMERICAN

-0.2

Correlation Coefficient

Primoris Services  AMERICAN

Good diversification

The 3 months correlation between Primoris and AMERICAN is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP and Primoris Services 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 Primoris Services are associated (or correlated) with AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Primoris Services i.e., Primoris Services and AMERICAN go up and down completely randomly.

Pair Corralation between Primoris Services and AMERICAN

Given the investment horizon of 90 days Primoris Services is expected to generate 2.95 times more return on investment than AMERICAN. However, Primoris Services is 2.95 times more volatile than AMERICAN FINL GROUP. It trades about 0.17 of its potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about -0.13 per unit of risk. If you would invest  6,008  in Primoris Services on October 10, 2024 and sell it today you would earn a total of  1,794  from holding Primoris Services or generate 29.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

Primoris Services  vs.  AMERICAN FINL GROUP

Primoris Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

AMERICAN FINL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN FINL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AMERICAN FINL GROUP investors.

Pair Trading with Primoris Services and AMERICAN

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

The idea behind Primoris Services and AMERICAN FINL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.