Correlation Between Distilleries Company and Amana Bank

Can any of the company-specific risk be diversified away by investing in both Distilleries Company and Amana Bank 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 Distilleries Company and Amana Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Distilleries Company and Amana Bank

0.79

Correlation Coefficient

Distilleries Company  Amana Bank

Poor diversification

The 3 months correlation between Distilleries and Amana is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Distilleries Company of and Amana Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Bank and Distilleries Company 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 Distilleries Company of are associated (or correlated) with Amana Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Bank has no effect on the direction of Distilleries Company i.e., Distilleries Company and Amana Bank go up and down completely randomly.

Pair Corralation between Distilleries Company and Amana Bank

Assuming the 90 days trading horizon Distilleries Company of is expected to generate 1.16 times more return on investment than Amana Bank. However, Distilleries Company is 1.16 times more volatile than Amana Bank. It trades about 0.41 of its potential returns per unit of risk. Amana Bank is currently generating about 0.16 per unit of risk. If you would invest  2,550  in Distilleries Company of on September 16, 2024 and sell it today you would earn a total of  1,050  from holding Distilleries Company of or generate 41.18% return on investment over 90 days.

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

Distilleries Company of  vs.  Amana Bank

Distilleries Company

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Distilleries Company of are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Distilleries Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Amana Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amana Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Distilleries Company and Amana Bank

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

The idea behind Distilleries Company of and Amana Bank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..