Correlation Between EXELON and Acme United

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Can any of the company-specific risk be diversified away by investing in both EXELON and Acme United 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 EXELON and Acme United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXELON P 395 and Acme United, you can compare the effects of market volatilities on EXELON and Acme United 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 EXELON with a short position of Acme United. Check out your portfolio center. Please also check ongoing floating volatility patterns of EXELON and Acme United.

Diversification Opportunities for EXELON and Acme United

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between EXELON and Acme is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding EXELON P 395 and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United and EXELON 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 EXELON P 395 are associated (or correlated) with Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of EXELON i.e., EXELON and Acme United go up and down completely randomly.

Pair Corralation between EXELON and Acme United

Assuming the 90 days trading horizon EXELON P 395 is expected to under-perform the Acme United. But the bond apears to be less risky and, when comparing its historical volatility, EXELON P 395 is 3.69 times less risky than Acme United. The bond trades about -0.24 of its potential returns per unit of risk. The Acme United is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,050  in Acme United on August 28, 2024 and sell it today you would earn a total of  425.00  from holding Acme United or generate 10.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

EXELON P 395  vs.  Acme United

 Performance 
       Timeline  
EXELON P 5 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EXELON P 395 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EXELON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Acme United 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Acme United are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Acme United is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

EXELON and Acme United Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EXELON and Acme United

The main advantage of trading using opposite EXELON and Acme United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EXELON position performs unexpectedly, Acme United 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 Acme United will offset losses from the drop in Acme United's long position.
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The idea behind EXELON P 395 and Acme United 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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