Correlation Between American Woodmark and Hisense Home

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

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

Diversification Opportunities for American Woodmark and Hisense Home

-0.12

Correlation Coefficient

American Woodmark  Hisense Home

Good diversification

The 3 months correlation between American and Hisense is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Woodmark and Hisense Home Appliances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisense Home Appliances and American Woodmark 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 Woodmark are associated (or correlated) with Hisense Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisense Home Appliances has no effect on the direction of American Woodmark i.e., American Woodmark and Hisense Home go up and down completely randomly.

Pair Corralation between American Woodmark and Hisense Home

Assuming the 90 days horizon American Woodmark is expected to generate 0.58 times more return on investment than Hisense Home. However, American Woodmark is 1.72 times less risky than Hisense Home. It trades about 0.03 of its potential returns per unit of risk. Hisense Home Appliances is currently generating about 0.02 per unit of risk. If you would invest  7,250  in American Woodmark on September 29, 2024 and sell it today you would earn a total of  450.00  from holding American Woodmark or generate 6.21% return on investment over 90 days.

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

American Woodmark  vs.  Hisense Home Appliances

American Woodmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Woodmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Woodmark is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hisense Home Appliances

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hisense Home Appliances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hisense Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Woodmark and Hisense Home

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

The idea behind American Woodmark and Hisense Home Appliances 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.