Correlation Between American Public and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both American Public and H2O Retailing 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 H2O Retailing 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 H2O Retailing, you can compare the effects of market volatilities on American Public and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and H2O Retailing.
Diversification Opportunities for American Public and H2O Retailing
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and H2O is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of American Public i.e., American Public and H2O Retailing go up and down completely randomly.
Pair Corralation between American Public and H2O Retailing
Assuming the 90 days horizon American Public Education is expected to under-perform the H2O Retailing. In addition to that, American Public is 1.51 times more volatile than H2O Retailing. It trades about -0.02 of its total potential returns per unit of risk. H2O Retailing is currently generating about 0.01 per unit of volatility. If you would invest 1,380 in H2O Retailing on October 30, 2024 and sell it today you would earn a total of 0.00 from holding H2O Retailing or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Public Education vs. H2O Retailing
Performance |
| Timeline |
| American Public Education |
| H2O Retailing |
American Public and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and H2O Retailing
The main advantage of trading using opposite American Public and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| American Public vs. alstria office REIT AG | American Public vs. Sunstone Hotel Investors | American Public vs. HYATT HOTELS A | American Public vs. MAVEN WIRELESS SWEDEN |
| H2O Retailing vs. SHOPRITE HDGS ADR | H2O Retailing vs. Superior Plus Corp | H2O Retailing vs. Origin Agritech | H2O Retailing vs. Identiv |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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