Correlation Between Continental and AMCON Distributing

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

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

Diversification Opportunities for Continental and AMCON Distributing

0.47

Correlation Coefficient

Continental  AMCON Distributing

Very weak diversification

The 3 months correlation between Continental and AMCON is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing and Continental 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 Caleres are associated (or correlated) with AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of Continental i.e., Continental and AMCON Distributing go up and down completely randomly.

Pair Corralation between Continental and AMCON Distributing

Considering the 90-day investment horizon Continental is expected to generate 1.6 times less return on investment than AMCON Distributing. But when comparing it to its historical volatility, Caleres is 2.01 times less risky than AMCON Distributing. It trades about 0.11 of its potential returns per unit of risk. AMCON Distributing is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,482  in AMCON Distributing on September 2, 2024 and sell it today you would earn a total of  925.00  from holding AMCON Distributing or generate 7.41% return on investment over 90 days.

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

Caleres  vs.  AMCON Distributing

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Continental and AMCON Distributing

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

The idea behind Caleres and AMCON Distributing 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.