Correlation Between Strickland Metals and Ampol

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

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

Diversification Opportunities for Strickland Metals and Ampol

0.46

Correlation Coefficient

Strickland Metals  Ampol

Very weak diversification

The 3 months correlation between Strickland and Ampol is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Strickland Metals and Ampol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol and Strickland Metals 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 Strickland Metals are associated (or correlated) with Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol has no effect on the direction of Strickland Metals i.e., Strickland Metals and Ampol go up and down completely randomly.

Pair Corralation between Strickland Metals and Ampol

Assuming the 90 days trading horizon Strickland Metals is expected to under-perform the Ampol. In addition to that, Strickland Metals is 2.95 times more volatile than Ampol. It trades about -0.03 of its total potential returns per unit of risk. Ampol is currently generating about -0.01 per unit of volatility. If you would invest  2,895  in Ampol on September 4, 2024 and sell it today you would lose (37.00) from holding Ampol or give up 1.28% of portfolio value over 90 days.

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

Strickland Metals  vs.  Ampol

Strickland Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strickland Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ampol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ampol is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Strickland Metals and Ampol

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

The idea behind Strickland Metals and Ampol 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.