Correlation Between American Outdoor and BANDAI NAMCO

Can any of the company-specific risk be diversified away by investing in both American Outdoor and BANDAI NAMCO 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 BANDAI NAMCO 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 BANDAI NAMCO Holdings, you can compare the effects of market volatilities on American Outdoor and BANDAI NAMCO 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 BANDAI NAMCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Outdoor and BANDAI NAMCO.

Diversification Opportunities for American Outdoor and BANDAI NAMCO

0.07

Correlation Coefficient

American Outdoor  BANDAI NAMCO

Significant diversification

The 3 months correlation between American and BANDAI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Outdoor Brands and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of American Outdoor i.e., American Outdoor and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between American Outdoor and BANDAI NAMCO

Given the investment horizon of 90 days American Outdoor Brands is expected to generate 1.38 times more return on investment than BANDAI NAMCO. However, American Outdoor is 1.38 times more volatile than BANDAI NAMCO Holdings. It trades about 0.05 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.0 per unit of risk. If you would invest  920.00  in American Outdoor Brands on September 3, 2024 and sell it today you would earn a total of  61.00  from holding American Outdoor Brands or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

American Outdoor Brands  vs.  BANDAI NAMCO Holdings

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.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANDAI NAMCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, BANDAI NAMCO 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 Outdoor and BANDAI NAMCO

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

The idea behind American Outdoor Brands and BANDAI NAMCO Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.