Correlation Between CIRCOR International and American Superconductor

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

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

Diversification Opportunities for CIRCOR International and American Superconductor

0.01

Correlation Coefficient

CIRCOR International  American Superconductor

Significant diversification

The 3 months correlation between CIRCOR and American is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CIRCOR International and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and CIRCOR International 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 CIRCOR International 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 CIRCOR International i.e., CIRCOR International and American Superconductor go up and down completely randomly.

Pair Corralation between CIRCOR International and American Superconductor

Considering the 90-day investment horizon CIRCOR International is expected to generate 0.73 times more return on investment than American Superconductor. However, CIRCOR International is 1.37 times less risky than American Superconductor. It trades about 0.14 of its potential returns per unit of risk. American Superconductor is currently generating about 0.1 per unit of risk. If you would invest  2,747  in CIRCOR International on January 25, 2024 and sell it today you would earn a total of  2,853  from holding CIRCOR International or generate 103.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	48.18%
Values	Daily Returns

CIRCOR International  vs.  American Superconductor

CIRCOR International

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Superconductor

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with CIRCOR International and American Superconductor

The main advantage of trading using opposite CIRCOR International and American Superconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIRCOR International 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 CIRCOR International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.