Correlation Between Applied DB and Ama Marine

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

By analyzing existing cross correlation between Applied DB Public and Ama Marine Public, you can compare the effects of market volatilities on Applied DB and Ama Marine 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 Applied DB with a short position of Ama Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied DB and Ama Marine.

Diversification Opportunities for Applied DB and Ama Marine

0.7

Correlation Coefficient

Applied DB  Ama Marine

Poor diversification

The 3 months correlation between Applied and Ama is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Applied DB Public and Ama Marine Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ama Marine Public and Applied DB 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 Applied DB Public are associated (or correlated) with Ama Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ama Marine Public has no effect on the direction of Applied DB i.e., Applied DB and Ama Marine go up and down completely randomly.

Pair Corralation between Applied DB and Ama Marine

Assuming the 90 days trading horizon Applied DB Public is expected to generate 4.72 times more return on investment than Ama Marine. However, Applied DB is 4.72 times more volatile than Ama Marine Public. It trades about -0.01 of its potential returns per unit of risk. Ama Marine Public is currently generating about -0.18 per unit of risk. If you would invest  96.00  in Applied DB Public on September 27, 2024 and sell it today you would lose (8.00) from holding Applied DB Public or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Applied DB Public  vs.  Ama Marine Public

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ama Marine Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ama Marine Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Applied DB and Ama Marine

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

The idea behind Applied DB Public and Ama Marine Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.