Correlation Between Benchmark Electronics and American Aires

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

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

Diversification Opportunities for Benchmark Electronics and American Aires

-0.67

Correlation Coefficient

Benchmark Electronics  American Aires

Excellent diversification

The 3 months correlation between Benchmark and American is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires and Benchmark Electronics 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 Benchmark Electronics are associated (or correlated) with American Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of Benchmark Electronics i.e., Benchmark Electronics and American Aires go up and down completely randomly.

Pair Corralation between Benchmark Electronics and American Aires

Considering the 90-day investment horizon Benchmark Electronics is expected to under-perform the American Aires. But the stock apears to be less risky and, when comparing its historical volatility, Benchmark Electronics is 5.64 times less risky than American Aires. The stock trades about -0.23 of its potential returns per unit of risk. The American Aires is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13.00  in American Aires on September 23, 2024 and sell it today you would earn a total of  3.00  from holding American Aires or generate 23.08% return on investment over 90 days.

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

Benchmark Electronics  vs.  American Aires

Benchmark Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Benchmark Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

American Aires

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Aires has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Benchmark Electronics and American Aires

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

The idea behind Benchmark Electronics and American Aires 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.