Correlation Between Marcus and POTOMAC

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Can any of the company-specific risk be diversified away by investing in both Marcus and POTOMAC 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 Marcus and POTOMAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marcus and POTOMAC ELEC PWR, you can compare the effects of market volatilities on Marcus and POTOMAC 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 Marcus with a short position of POTOMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marcus and POTOMAC.

Diversification Opportunities for Marcus and POTOMAC

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Marcus and POTOMAC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Marcus and POTOMAC ELEC PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POTOMAC ELEC PWR and Marcus 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 Marcus are associated (or correlated) with POTOMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POTOMAC ELEC PWR has no effect on the direction of Marcus i.e., Marcus and POTOMAC go up and down completely randomly.

Pair Corralation between Marcus and POTOMAC

Considering the 90-day investment horizon Marcus is expected to generate 1.88 times less return on investment than POTOMAC. In addition to that, Marcus is 1.02 times more volatile than POTOMAC ELEC PWR. It trades about 0.11 of its total potential returns per unit of risk. POTOMAC ELEC PWR is currently generating about 0.21 per unit of volatility. If you would invest  8,330  in POTOMAC ELEC PWR on November 28, 2024 and sell it today you would earn a total of  434.00  from holding POTOMAC ELEC PWR or generate 5.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy71.43%
ValuesDaily Returns

Marcus  vs.  POTOMAC ELEC PWR

 Performance 
       Timeline  
Marcus 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Marcus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
POTOMAC ELEC PWR 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in POTOMAC ELEC PWR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, POTOMAC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Marcus and POTOMAC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marcus and POTOMAC

The main advantage of trading using opposite Marcus and POTOMAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marcus position performs unexpectedly, POTOMAC 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 POTOMAC will offset losses from the drop in POTOMAC's long position.
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The idea behind Marcus and POTOMAC ELEC PWR 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.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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