Correlation Between Acme United and United Guardian

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

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

Diversification Opportunities for Acme United and United Guardian

0.12

Correlation Coefficient

Acme United  United Guardian

Average diversification

The 3 months correlation between Acme and United is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Acme United i.e., Acme United and United Guardian go up and down completely randomly.

Pair Corralation between Acme United and United Guardian

Considering the 90-day investment horizon Acme United is expected to under-perform the United Guardian. But the stock apears to be less risky and, when comparing its historical volatility, Acme United is 1.11 times less risky than United Guardian. The stock trades about -0.02 of its potential returns per unit of risk. The United Guardian is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  740.00  in United Guardian on October 10, 2024 and sell it today you would earn a total of  266.00  from holding United Guardian or generate 35.95% 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.  United Guardian

Acme United

Risk-Adjusted Performance

0 of 100

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Acme United and United Guardian

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

The idea behind Acme United and United Guardian 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 CEOs Directory module to screen CEOs from public companies around the world.