Correlation Between Tandem Diabetes and AMERICAN

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

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

Diversification Opportunities for Tandem Diabetes and AMERICAN

-0.14

Correlation Coefficient

Tandem Diabetes  AMERICAN

Good diversification

The 3 months correlation between Tandem and AMERICAN is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP and Tandem Diabetes 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 Tandem Diabetes Care 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 INTL GROUP has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and AMERICAN go up and down completely randomly.

Pair Corralation between Tandem Diabetes and AMERICAN

Given the investment horizon of 90 days Tandem Diabetes Care is expected to generate 4.86 times more return on investment than AMERICAN. However, Tandem Diabetes is 4.86 times more volatile than AMERICAN INTL GROUP. It trades about 0.03 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about -0.19 per unit of risk. If you would invest  3,614  in Tandem Diabetes Care on October 10, 2024 and sell it today you would earn a total of  135.00  from holding Tandem Diabetes Care or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.84%
Values	Daily Returns

Tandem Diabetes Care  vs.  AMERICAN INTL GROUP

Tandem Diabetes Care

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tandem Diabetes Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tandem Diabetes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AMERICAN INTL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN INTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 INTL GROUP investors.

Pair Trading with Tandem Diabetes and AMERICAN

The main advantage of trading using opposite Tandem Diabetes and AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care and AMERICAN INTL 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.