Correlation Between Traeger and American Woodmark

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

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

Diversification Opportunities for Traeger and American Woodmark

0.58

Correlation Coefficient

Traeger  American Woodmark

Very weak diversification

The 3 months correlation between Traeger and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Traeger and American Woodmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Woodmark and Traeger 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 Traeger are associated (or correlated) with American Woodmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Woodmark has no effect on the direction of Traeger i.e., Traeger and American Woodmark go up and down completely randomly.

Pair Corralation between Traeger and American Woodmark

Given the investment horizon of 90 days Traeger is expected to under-perform the American Woodmark. In addition to that, Traeger is 1.86 times more volatile than American Woodmark. It trades about -0.23 of its total potential returns per unit of risk. American Woodmark is currently generating about -0.2 per unit of volatility. If you would invest  9,930  in American Woodmark on January 25, 2024 and sell it today you would lose (713.00) from holding American Woodmark or give up 7.18% of portfolio value over 90 days.

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

Traeger  vs.  American Woodmark

Traeger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traeger has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Traeger is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

American Woodmark

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Woodmark are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, American Woodmark is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Traeger and American Woodmark

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

The idea behind Traeger and American Woodmark 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.