Correlation Between Acme United and SOUTHERN

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

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

Diversification Opportunities for Acme United and SOUTHERN

0.26

Correlation Coefficient

Acme United  SOUTHERN

Modest diversification

The 3 months correlation between Acme and SOUTHERN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Acme United i.e., Acme United and SOUTHERN go up and down completely randomly.

Pair Corralation between Acme United and SOUTHERN

Considering the 90-day investment horizon Acme United is expected to generate 3.44 times more return on investment than SOUTHERN. However, Acme United is 3.44 times more volatile than SOUTHERN PER CORP. It trades about 0.05 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about 0.0 per unit of risk. If you would invest  2,219  in Acme United on October 4, 2024 and sell it today you would earn a total of  1,514  from holding Acme United or generate 68.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.42%
Values	Daily Returns

Acme United  vs.  SOUTHERN PER CORP

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 latest abnormal performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Acme United and SOUTHERN

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

The idea behind Acme United and SOUTHERN PER CORP 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.