Correlation Between Absolute Health and All American

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

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

Diversification Opportunities for Absolute Health and All American

0.0

Correlation Coefficient

Absolute Health  All American

Pay attention - limited upside

The 3 months correlation between Absolute and All is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Health and and All American Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Pet and Absolute Health 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 Absolute Health and are associated (or correlated) with All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Pet has no effect on the direction of Absolute Health i.e., Absolute Health and All American go up and down completely randomly.

Pair Corralation between Absolute Health and All American

Given the investment horizon of 90 days Absolute Health is expected to generate 3.18 times less return on investment than All American. But when comparing it to its historical volatility, Absolute Health and is 1.15 times less risky than All American. It trades about 0.03 of its potential returns per unit of risk. All American Pet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.03  in All American Pet on September 23, 2024 and sell it today you would lose (0.02) from holding All American Pet or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Absolute Health and  vs.  All American Pet

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, All American 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 Absolute Health and All American

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

The idea behind Absolute Health and and All American Pet 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.