Correlation Between Wex and ACI Worldwide
Can any of the company-specific risk be diversified away by investing in both Wex and ACI Worldwide 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 Wex and ACI Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wex Inc and ACI Worldwide, you can compare the effects of market volatilities on Wex and ACI Worldwide 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 Wex with a short position of ACI Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wex and ACI Worldwide.
Diversification Opportunities for Wex and ACI Worldwide
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wex and ACI is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and ACI Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACI Worldwide and Wex 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 Wex Inc are associated (or correlated) with ACI Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACI Worldwide has no effect on the direction of Wex i.e., Wex and ACI Worldwide go up and down completely randomly.
Pair Corralation between Wex and ACI Worldwide
Considering the 90-day investment horizon Wex is expected to generate 1.71 times less return on investment than ACI Worldwide. But when comparing it to its historical volatility, Wex Inc is 1.46 times less risky than ACI Worldwide. It trades about 0.2 of its potential returns per unit of risk. ACI Worldwide is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,949 in ACI Worldwide on September 2, 2024 and sell it today you would earn a total of 733.00 from holding ACI Worldwide or generate 14.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wex Inc vs. ACI Worldwide
Performance |
| Timeline |
| Wex Inc |
| ACI Worldwide |
Wex and ACI Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wex and ACI Worldwide
The main advantage of trading using opposite Wex and ACI Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex position performs unexpectedly, ACI Worldwide 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 ACI Worldwide will offset losses from the drop in ACI Worldwide's long position.The idea behind Wex Inc and ACI Worldwide 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.| ACI Worldwide vs. NetScout Systems | ACI Worldwide vs. Consensus Cloud Solutions | ACI Worldwide vs. CSG Systems International | ACI Worldwide vs. Remitly Global |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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