Correlation Between American Public and Redcare Pharmacy

Can any of the company-specific risk be diversified away by investing in both American Public and Redcare Pharmacy 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 American Public and Redcare Pharmacy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Public Education and Redcare Pharmacy NV, you can compare the effects of market volatilities on American Public and Redcare Pharmacy 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 American Public with a short position of Redcare Pharmacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and Redcare Pharmacy.

Diversification Opportunities for American Public and Redcare Pharmacy

-0.01

Correlation Coefficient

American Public  Redcare Pharmacy

Good diversification

The 3 months correlation between American and Redcare is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Redcare Pharmacy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redcare Pharmacy and American 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 American Public Education are associated (or correlated) with Redcare Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redcare Pharmacy has no effect on the direction of American Public i.e., American Public and Redcare Pharmacy go up and down completely randomly.

Pair Corralation between American Public and Redcare Pharmacy

Assuming the 90 days horizon American Public is expected to generate 7.43 times less return on investment than Redcare Pharmacy. But when comparing it to its historical volatility, American Public Education is 6.63 times less risky than Redcare Pharmacy. It trades about 0.05 of its potential returns per unit of risk. Redcare Pharmacy NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,436  in Redcare Pharmacy NV on October 11, 2024 and sell it today you would earn a total of  5,614  from holding Redcare Pharmacy NV or generate 87.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

American Public Education  vs.  Redcare Pharmacy NV

American Public Education

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Redcare Pharmacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redcare Pharmacy NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American Public and Redcare Pharmacy

The main advantage of trading using opposite American Public and Redcare Pharmacy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public position performs unexpectedly, Redcare Pharmacy 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 Redcare Pharmacy will offset losses from the drop in Redcare Pharmacy's long position.

The idea behind American Public Education and Redcare Pharmacy NV 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.