Correlation Between Amada and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Amada and US Bancorp 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 Amada and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amada Co and US Bancorp PERP, you can compare the effects of market volatilities on Amada and US Bancorp 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 Amada with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amada and US Bancorp.
Diversification Opportunities for Amada and US Bancorp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amada and USB-PA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and US Bancorp PERP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp PERP and Amada 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 Amada Co are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp PERP has no effect on the direction of Amada i.e., Amada and US Bancorp go up and down completely randomly.
Pair Corralation between Amada and US Bancorp
Assuming the 90 days horizon Amada Co is expected to under-perform the US Bancorp. In addition to that, Amada is 1.24 times more volatile than US Bancorp PERP. It trades about -0.3 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.04 per unit of volatility. If you would invest 86,738 in US Bancorp PERP on January 24, 2024 and sell it today you would earn a total of 787.00 from holding US Bancorp PERP or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amada Co vs. US Bancorp PERP
Performance |
| Timeline |
| Amada |
| US Bancorp PERP |
Amada and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amada and US Bancorp
The main advantage of trading using opposite Amada and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Amada vs. Lilium Equity Warrants | Amada vs. Blade Air Mobility | Amada vs. HUMANA INC | Amada vs. Aquagold International |
| US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial | US Bancorp vs. US Bancorp | US Bancorp vs. KeyCorp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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