Correlation Between Altra Industrial and American Superconductor

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

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

Diversification Opportunities for Altra Industrial and American Superconductor

0.69

Correlation Coefficient

Altra Industrial  American Superconductor

Poor diversification

The 3 months correlation between Altra and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Altra Industrial Motion and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and Altra Industrial 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 Altra Industrial Motion are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of Altra Industrial i.e., Altra Industrial and American Superconductor go up and down completely randomly.

Pair Corralation between Altra Industrial and American Superconductor

If you would invest  419.00  in American Superconductor on January 19, 2024 and sell it today you would earn a total of  756.00  from holding American Superconductor or generate 180.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.44%
Values	Daily Returns

Altra Industrial Motion  vs.  American Superconductor

Altra Industrial Motion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altra Industrial Motion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Altra Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Superconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Superconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, American Superconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altra Industrial and American Superconductor

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

The idea behind Altra Industrial Motion and American Superconductor 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.