Correlation Between American Outdoor and Life Clips

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

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

Diversification Opportunities for American Outdoor and Life Clips

0.0

Correlation Coefficient

American Outdoor  Life Clips

Pay attention - limited upside

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

Pair Corralation between American Outdoor and Life Clips

Given the investment horizon of 90 days American Outdoor Brands is expected to generate 0.26 times more return on investment than Life Clips. However, American Outdoor Brands is 3.78 times less risky than Life Clips. It trades about 0.01 of its potential returns per unit of risk. Life Clips is currently generating about -0.13 per unit of risk. If you would invest  1,010  in American Outdoor Brands on September 3, 2024 and sell it today you would lose (23.00) from holding American Outdoor Brands or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	30.71%
Values	Daily Returns

American Outdoor Brands  vs.  Life Clips

American Outdoor Brands

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Outdoor Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, American Outdoor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Life Clips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Clips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Life Clips is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with American Outdoor and Life Clips

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

The idea behind American Outdoor Brands and Life Clips 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.