Correlation Between AAP and Sparta Capital
Can any of the company-specific risk be diversified away by investing in both AAP and Sparta Capital 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 AAP and Sparta Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAP Inc and Sparta Capital, you can compare the effects of market volatilities on AAP and Sparta Capital 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 AAP with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and Sparta Capital.
Diversification Opportunities for AAP and Sparta Capital
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AAP and Sparta is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and AAP 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 AAP Inc are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of AAP i.e., AAP and Sparta Capital go up and down completely randomly.
Pair Corralation between AAP and Sparta Capital
If you would invest 0.02 in AAP Inc on November 3, 2024 and sell it today you would lose (0.01) from holding AAP Inc or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
AAP Inc vs. Sparta Capital
Performance |
| Timeline |
| AAP Inc |
| Sparta Capital |
AAP and Sparta Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAP and Sparta Capital
The main advantage of trading using opposite AAP and Sparta Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAP position performs unexpectedly, Sparta Capital 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 Sparta Capital will offset losses from the drop in Sparta Capital's long position.The idea behind AAP Inc and Sparta Capital 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.| Sparta Capital vs. Zurn Elkay Water | Sparta Capital vs. Federal Signal | Sparta Capital vs. Energy Recovery | Sparta Capital vs. CECO Environmental Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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