Correlation Between American Aires and Bel Fuse

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

By analyzing existing cross correlation between American Aires and Bel Fuse A, you can compare the effects of market volatilities on American Aires and Bel Fuse 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 American Aires with a short position of Bel Fuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Aires and Bel Fuse.

Diversification Opportunities for American Aires and Bel Fuse

0.45

Correlation Coefficient

American Aires  Bel Fuse

Very weak diversification

The 3 months correlation between American and Bel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Aires and Bel Fuse A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse A and American Aires 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 American Aires are associated (or correlated) with Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse A has no effect on the direction of American Aires i.e., American Aires and Bel Fuse go up and down completely randomly.

Pair Corralation between American Aires and Bel Fuse

Assuming the 90 days horizon American Aires is expected to under-perform the Bel Fuse. In addition to that, American Aires is 3.1 times more volatile than Bel Fuse A. It trades about -0.09 of its total potential returns per unit of risk. Bel Fuse A is currently generating about -0.02 per unit of volatility. If you would invest  10,044  in Bel Fuse A on September 23, 2024 and sell it today you would lose (395.00) from holding Bel Fuse A or give up 3.93% of portfolio value over 90 days.

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

American Aires  vs.  Bel Fuse A

American Aires

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Aires has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bel Fuse A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bel Fuse A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Bel Fuse is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Aires and Bel Fuse

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

The idea behind American Aires and Bel Fuse A 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.