Correlation Between AVVAA World and American Leisure

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

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

Diversification Opportunities for AVVAA World and American Leisure

0.09

Correlation Coefficient

AVVAA World  American Leisure

Significant diversification

The 3 months correlation between AVVAA and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AVVAA World Health and American Leisure Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Leisure Holdings and AVVAA World 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 AVVAA World Health are associated (or correlated) with American Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Leisure Holdings has no effect on the direction of AVVAA World i.e., AVVAA World and American Leisure go up and down completely randomly.

Pair Corralation between AVVAA World and American Leisure

Given the investment horizon of 90 days AVVAA World is expected to generate 16.06 times less return on investment than American Leisure. But when comparing it to its historical volatility, AVVAA World Health is 3.98 times less risky than American Leisure. It trades about 0.03 of its potential returns per unit of risk. American Leisure Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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

AVVAA World Health  vs.  American Leisure Holdings

AVVAA World Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVVAA World Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, AVVAA World demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with AVVAA World and American Leisure

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

The idea behind AVVAA World Health and American Leisure 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.