Correlation Between American Leisure and New Generation

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

By analyzing existing cross correlation between American Leisure Holdings and New Generation Consumer, you can compare the effects of market volatilities on American Leisure and New Generation 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 Leisure with a short position of New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Leisure and New Generation.

Diversification Opportunities for American Leisure and New Generation

0.04

Correlation Coefficient

American Leisure  New Generation

Significant diversification

The 3 months correlation between American and New is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Leisure Holdings and New Generation Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Generation Consumer and American Leisure 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 Leisure Holdings are associated (or correlated) with New Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Generation Consumer has no effect on the direction of American Leisure i.e., American Leisure and New Generation go up and down completely randomly.

Pair Corralation between American Leisure and New Generation

Given the investment horizon of 90 days American Leisure Holdings is expected to generate 2.83 times more return on investment than New Generation. However, American Leisure is 2.83 times more volatile than New Generation Consumer. It trades about 0.14 of its potential returns per unit of risk. New Generation Consumer is currently generating about 0.04 per unit of risk. If you would invest  0.03  in American Leisure Holdings on September 17, 2024 and sell it today you would lose (0.02) from holding American Leisure Holdings or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

American Leisure Holdings  vs.  New Generation Consumer

American Leisure Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Leisure Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, American Leisure demonstrated solid returns over the last few months and may actually be approaching a breakup point.

New Generation Consumer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Leisure and New Generation

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

The idea behind American Leisure Holdings and New Generation Consumer 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.