Correlation Between Atlantic Coastal and Ace Global
Can any of the company-specific risk be diversified away by investing in both Atlantic Coastal and Ace Global 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 Atlantic Coastal and Ace Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlantic Coastal Acquisition and Ace Global Business, you can compare the effects of market volatilities on Atlantic Coastal and Ace Global 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 Atlantic Coastal with a short position of Ace Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlantic Coastal and Ace Global.
Diversification Opportunities for Atlantic Coastal and Ace Global
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Atlantic and Ace is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Coastal Acquisition and Ace Global Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Global Business and Atlantic Coastal 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 Atlantic Coastal Acquisition are associated (or correlated) with Ace Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Global Business has no effect on the direction of Atlantic Coastal i.e., Atlantic Coastal and Ace Global go up and down completely randomly.
Pair Corralation between Atlantic Coastal and Ace Global
Assuming the 90 days horizon Atlantic Coastal Acquisition is expected to generate 1.81 times more return on investment than Ace Global. However, Atlantic Coastal is 1.81 times more volatile than Ace Global Business. It trades about 0.15 of its potential returns per unit of risk. Ace Global Business is currently generating about 0.12 per unit of risk. If you would invest 4.04 in Atlantic Coastal Acquisition on September 3, 2024 and sell it today you would lose (0.37) from holding Atlantic Coastal Acquisition or give up 9.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 78.85% |
| Values | Daily Returns |
Atlantic Coastal Acquisition vs. Ace Global Business
Performance |
| Timeline |
| Atlantic Coastal Acq |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ace Global Business |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Atlantic Coastal and Ace Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlantic Coastal and Ace Global
The main advantage of trading using opposite Atlantic Coastal and Ace Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlantic Coastal position performs unexpectedly, Ace Global 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 Ace Global will offset losses from the drop in Ace Global's long position.The idea behind Atlantic Coastal Acquisition and Ace Global Business 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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