Correlation Between Timken and American Rebel

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

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

Diversification Opportunities for Timken and American Rebel

0.22

Correlation Coefficient

Timken  American Rebel

Modest diversification

The 3 months correlation between Timken and American is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and American Rebel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rebel Holdings and Timken 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 Timken Company are associated (or correlated) with American Rebel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rebel Holdings has no effect on the direction of Timken i.e., Timken and American Rebel go up and down completely randomly.

Pair Corralation between Timken and American Rebel

Considering the 90-day investment horizon Timken Company is expected to under-perform the American Rebel. But the stock apears to be less risky and, when comparing its historical volatility, Timken Company is 56.07 times less risky than American Rebel. The stock trades about -0.01 of its potential returns per unit of risk. The American Rebel Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.50  in American Rebel Holdings on September 1, 2024 and sell it today you would lose (0.68) from holding American Rebel Holdings or give up 45.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

Timken Company  vs.  American Rebel Holdings

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

American Rebel Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Rebel Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, American Rebel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timken and American Rebel

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

The idea behind Timken Company and American Rebel 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.