Correlation Between American Premium and Lindsay

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

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

Diversification Opportunities for American Premium and Lindsay

0.19

Correlation Coefficient

American Premium  Lindsay

Average diversification

The 3 months correlation between American and Lindsay is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding American Premium Water and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay and American Premium 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 Premium Water are associated (or correlated) with Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of American Premium i.e., American Premium and Lindsay go up and down completely randomly.

Pair Corralation between American Premium and Lindsay

Given the investment horizon of 90 days American Premium Water is expected to generate 85.93 times more return on investment than Lindsay. However, American Premium is 85.93 times more volatile than Lindsay. It trades about 0.19 of its potential returns per unit of risk. Lindsay is currently generating about 0.02 per unit of risk. If you would invest  0.02  in American Premium Water on August 31, 2024 and sell it today you would lose (0.01) from holding American Premium Water or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.56%
Values	Daily Returns

American Premium Water  vs.  Lindsay

American Premium Water

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Lindsay

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsay are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lindsay may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with American Premium and Lindsay

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

The idea behind American Premium Water and Lindsay 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.