Correlation Between Sack Lunch and American Diversified

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

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

Diversification Opportunities for Sack Lunch and American Diversified

0.09

Correlation Coefficient

Sack Lunch  American Diversified

Significant diversification

The 3 months correlation between Sack and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sack Lunch Productions and American Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Diversified and Sack Lunch 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 Sack Lunch Productions are associated (or correlated) with American Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Diversified has no effect on the direction of Sack Lunch i.e., Sack Lunch and American Diversified go up and down completely randomly.

Pair Corralation between Sack Lunch and American Diversified

Given the investment horizon of 90 days Sack Lunch Productions is expected to under-perform the American Diversified. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sack Lunch Productions is 1.29 times less risky than American Diversified. The pink sheet trades about -0.05 of its potential returns per unit of risk. The American Diversified Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.20  in American Diversified Holdings on August 31, 2024 and sell it today you would lose (0.01) from holding American Diversified Holdings or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sack Lunch Productions  vs.  American Diversified Holdings

Sack Lunch Productions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sack Lunch Productions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

American Diversified

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Diversified Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, American Diversified exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sack Lunch and American Diversified

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

The idea behind Sack Lunch Productions and American Diversified Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.