Correlation Between American Public and Cars
Can any of the company-specific risk be diversified away by investing in both American Public and Cars 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 American Public and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and Cars Inc, you can compare the effects of market volatilities on American Public and Cars 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 American Public with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and Cars.
Diversification Opportunities for American Public and Cars
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Cars is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and American Public 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 American Public Education are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of American Public i.e., American Public and Cars go up and down completely randomly.
Pair Corralation between American Public and Cars
Assuming the 90 days horizon American Public Education is expected to generate 1.37 times more return on investment than Cars. However, American Public is 1.37 times more volatile than Cars Inc. It trades about -0.1 of its potential returns per unit of risk. Cars Inc is currently generating about -0.37 per unit of risk. If you would invest 2,060 in American Public Education on October 12, 2024 and sell it today you would lose (90.00) from holding American Public Education or give up 4.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Public Education vs. Cars Inc
Performance |
| Timeline |
| American Public Education |
| Cars Inc |
American Public and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and Cars
The main advantage of trading using opposite American Public and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| American Public vs. Marie Brizard Wine | American Public vs. BURLINGTON STORES | American Public vs. Global Ship Lease | American Public vs. Caseys General Stores |
| Cars vs. Direct Line Insurance | Cars vs. The Hanover Insurance | Cars vs. Reinsurance Group of | Cars vs. American Public Education |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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