Correlation Between Allstar Health and PetMed Express

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

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

Diversification Opportunities for Allstar Health and PetMed Express

0.03

Correlation Coefficient

Allstar Health  PetMed Express

Significant diversification

The 3 months correlation between Allstar and PetMed is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Allstar Health Brands and PetMed Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetMed Express and Allstar Health 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 Allstar Health Brands 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 Allstar Health i.e., Allstar Health and PetMed Express go up and down completely randomly.

Pair Corralation between Allstar Health and PetMed Express

Given the investment horizon of 90 days Allstar Health Brands is expected to generate 2.9 times more return on investment than PetMed Express. However, Allstar Health is 2.9 times more volatile than PetMed Express. It trades about 0.0 of its potential returns per unit of risk. PetMed Express is currently generating about -0.05 per unit of risk. If you would invest  0.06  in Allstar Health Brands on December 29, 2024 and sell it today you would lose (0.02) from holding Allstar Health Brands or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Allstar Health Brands  vs.  PetMed Express

Allstar Health Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allstar Health Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allstar Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PetMed Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days PetMed Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Allstar Health and PetMed Express

The main advantage of trading using opposite Allstar Health and PetMed Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstar Health 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 Allstar Health Brands 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.