Correlation Between Acme United and PrimeEnergy

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

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

Diversification Opportunities for Acme United and PrimeEnergy

0.04

Correlation Coefficient

Acme United  PrimeEnergy

Significant diversification

The 3 months correlation between Acme and PrimeEnergy is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of Acme United i.e., Acme United and PrimeEnergy go up and down completely randomly.

Pair Corralation between Acme United and PrimeEnergy

Considering the 90-day investment horizon Acme United is expected to generate 0.67 times more return on investment than PrimeEnergy. However, Acme United is 1.5 times less risky than PrimeEnergy. It trades about 0.11 of its potential returns per unit of risk. PrimeEnergy is currently generating about 0.01 per unit of risk. If you would invest  3,642  in Acme United on December 29, 2024 and sell it today you would earn a total of  453.00  from holding Acme United or generate 12.44% return on investment over 90 days.

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

Acme United  vs.  PrimeEnergy

Acme United

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acme United are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Acme United unveiled solid returns over the last few months and may actually be approaching a breakup point.

PrimeEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Acme United and PrimeEnergy

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

The idea behind Acme United and PrimeEnergy 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.