Correlation Between AP Public and S P
Can any of the company-specific risk be diversified away by investing in both AP Public and S P 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 AP Public and S P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AP Public and S P V, you can compare the effects of market volatilities on AP Public and S P 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 AP Public with a short position of S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Public and S P.
Diversification Opportunities for AP Public and S P
Very weak diversification
The 3 months correlation between AP Public and SPVI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AP Public and S P V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P V and AP 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 AP Public are associated (or correlated) with S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P V has no effect on the direction of AP Public i.e., AP Public and S P go up and down completely randomly.
Pair Corralation between AP Public and S P
Assuming the 90 days horizon AP Public is expected to generate 0.61 times more return on investment than S P. However, AP Public is 1.63 times less risky than S P. It trades about -0.29 of its potential returns per unit of risk. S P V is currently generating about -0.34 per unit of risk. If you would invest 960.00 in AP Public on September 2, 2024 and sell it today you would lose (95.00) from holding AP Public or give up 9.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AP Public vs. S P V
Performance |
| Timeline |
| AP Public |
| S P V |
AP Public and S P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AP Public and S P
The main advantage of trading using opposite AP Public and S P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Public position performs unexpectedly, S P 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 S P will offset losses from the drop in S P's long position.The idea behind AP Public and S P V 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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