Correlation Between Action Construction and Automotive Stampings

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

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

Diversification Opportunities for Action Construction and Automotive Stampings

-0.39

Correlation Coefficient

Action Construction  Automotive Stampings

Very good diversification

The 3 months correlation between Action and Automotive is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Action Construction Equipment and Automotive Stampings and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Stampings and and Action Construction 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 Action Construction Equipment are associated (or correlated) with Automotive Stampings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Stampings and has no effect on the direction of Action Construction i.e., Action Construction and Automotive Stampings go up and down completely randomly.

Pair Corralation between Action Construction and Automotive Stampings

Assuming the 90 days trading horizon Action Construction Equipment is expected to under-perform the Automotive Stampings. But the stock apears to be less risky and, when comparing its historical volatility, Action Construction Equipment is 1.58 times less risky than Automotive Stampings. The stock trades about -0.06 of its potential returns per unit of risk. The Automotive Stampings and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  51,085  in Automotive Stampings and on April 23, 2025 and sell it today you would earn a total of  8,085  from holding Automotive Stampings and or generate 15.83% return on investment over 90 days.

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

Action Construction Equipment  vs.  Automotive Stampings and

Action Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Action Construction Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Automotive Stampings and

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Stampings and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Automotive Stampings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Action Construction and Automotive Stampings

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

The idea behind Action Construction Equipment and Automotive Stampings and 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.