Correlation Between Alternative Energy and PetMed Express

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

By analyzing existing cross correlation between Alternative Energy and PetMed Express, you can compare the effects of market volatilities on Alternative Energy and PetMed Express 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 Alternative Energy with a short position of PetMed Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Energy and PetMed Express.

Diversification Opportunities for Alternative Energy and PetMed Express

-0.36

Correlation Coefficient

Alternative Energy  PetMed Express

Very good diversification

The 3 months correlation between Alternative and PetMed is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Energy and PetMed Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetMed Express and Alternative Energy 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 Alternative Energy are associated (or correlated) with PetMed Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetMed Express has no effect on the direction of Alternative Energy i.e., Alternative Energy and PetMed Express go up and down completely randomly.

Pair Corralation between Alternative Energy and PetMed Express

Given the investment horizon of 90 days Alternative Energy is expected to under-perform the PetMed Express. In addition to that, Alternative Energy is 1.84 times more volatile than PetMed Express. It trades about -0.12 of its total potential returns per unit of risk. PetMed Express is currently generating about 0.13 per unit of volatility. If you would invest  322.00  in PetMed Express on September 3, 2024 and sell it today you would earn a total of  141.00  from holding PetMed Express or generate 43.79% return on investment over 90 days.

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

Alternative Energy  vs.  PetMed Express

Alternative Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alternative Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PetMed Express

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PetMed Express are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PetMed Express unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alternative Energy and PetMed Express

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

The idea behind Alternative Energy and PetMed Express 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.