Correlation Between American Aires and Benchmark Electronics

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

By analyzing existing cross correlation between American Aires and Benchmark Electronics, you can compare the effects of market volatilities on American Aires and Benchmark Electronics 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Aires and Benchmark Electronics.

Diversification Opportunities for American Aires and Benchmark Electronics

-0.67

Correlation Coefficient

American Aires  Benchmark Electronics

Excellent diversification

The 3 months correlation between American and Benchmark is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Aires and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of American Aires i.e., American Aires and Benchmark Electronics go up and down completely randomly.

Pair Corralation between American Aires and Benchmark Electronics

Assuming the 90 days horizon American Aires is expected to under-perform the Benchmark Electronics. In addition to that, American Aires is 2.71 times more volatile than Benchmark Electronics. It trades about -0.09 of its total potential returns per unit of risk. Benchmark Electronics is currently generating about 0.03 per unit of volatility. If you would invest  4,381  in Benchmark Electronics on September 23, 2024 and sell it today you would earn a total of  140.00  from holding Benchmark Electronics or generate 3.2% return on investment over 90 days.

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

American Aires  vs.  Benchmark Electronics

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.

Benchmark Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Benchmark Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Aires and Benchmark Electronics

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

The idea behind American Aires and Benchmark Electronics 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.