Correlation Between Apogee Enterprises and Advanced Drainage
Can any of the company-specific risk be diversified away by investing in both Apogee Enterprises and Advanced Drainage 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 Apogee Enterprises and Advanced Drainage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apogee Enterprises and Advanced Drainage Systems, you can compare the effects of market volatilities on Apogee Enterprises and Advanced Drainage 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 Apogee Enterprises with a short position of Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apogee Enterprises and Advanced Drainage.
Diversification Opportunities for Apogee Enterprises and Advanced Drainage
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apogee and Advanced is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and Advanced Drainage Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Drainage Systems and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with Advanced Drainage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Drainage Systems has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and Advanced Drainage go up and down completely randomly.
Pair Corralation between Apogee Enterprises and Advanced Drainage
Given the investment horizon of 90 days Apogee Enterprises is expected to under-perform the Advanced Drainage. But the stock apears to be less risky and, when comparing its historical volatility, Apogee Enterprises is 1.18 times less risky than Advanced Drainage. The stock trades about -0.06 of its potential returns per unit of risk. The Advanced Drainage Systems is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 16,259 in Advanced Drainage Systems on January 18, 2024 and sell it today you would lose (167.00) from holding Advanced Drainage Systems or give up 1.03% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Apogee Enterprises vs. Advanced Drainage Systems
Performance |
Timeline |
Apogee Enterprises |
Advanced Drainage Systems |
Apogee Enterprises and Advanced Drainage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apogee Enterprises and Advanced Drainage
The main advantage of trading using opposite Apogee Enterprises and Advanced Drainage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apogee Enterprises position performs unexpectedly, Advanced Drainage 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 Advanced Drainage will offset losses from the drop in Advanced Drainage's long position.Apogee Enterprises vs. Carpenter Technology | Apogee Enterprises vs. Myers Industries | Apogee Enterprises vs. Griffon |
Advanced Drainage vs. Carpenter Technology | Advanced Drainage vs. Myers Industries | Advanced Drainage vs. Griffon |
Check out your portfolio center.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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