Correlation Between Acme United and Ambipar Emergency

Can any of the company-specific risk be diversified away by investing in both Acme United and Ambipar Emergency 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 Acme United and Ambipar Emergency into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acme United and Ambipar Emergency Response, you can compare the effects of market volatilities on Acme United and Ambipar Emergency 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 Acme United with a short position of Ambipar Emergency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acme United and Ambipar Emergency.

Diversification Opportunities for Acme United and Ambipar Emergency

0.23

Correlation Coefficient

Acme United  Ambipar Emergency

Modest diversification

The 3 months correlation between Acme and Ambipar is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and Ambipar Emergency Response in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambipar Emergency and Acme United 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 Acme United are associated (or correlated) with Ambipar Emergency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambipar Emergency has no effect on the direction of Acme United i.e., Acme United and Ambipar Emergency go up and down completely randomly.

Pair Corralation between Acme United and Ambipar Emergency

Considering the 90-day investment horizon Acme United is expected to under-perform the Ambipar Emergency. But the stock apears to be less risky and, when comparing its historical volatility, Acme United is 2.28 times less risky than Ambipar Emergency. The stock trades about -0.14 of its potential returns per unit of risk. The Ambipar Emergency Response is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  534.00  in Ambipar Emergency Response on November 28, 2024 and sell it today you would lose (79.00) from holding Ambipar Emergency Response or give up 14.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Acme United  vs.  Ambipar Emergency Response

Acme United

Risk-Adjusted Performance

Very Weak

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

Ambipar Emergency

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ambipar Emergency Response has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Acme United and Ambipar Emergency

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

The idea behind Acme United and Ambipar Emergency Response 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.