Correlation Between AP Public and CAZ Public

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

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

Diversification Opportunities for AP Public and CAZ Public

-0.62

Correlation Coefficient

AP Public  CAZ Public

Excellent diversification

The 3 months correlation between AP Public and CAZ is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding AP Public and CAZ Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAZ Public and AP Public 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 AP Public are associated (or correlated) with CAZ Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAZ Public has no effect on the direction of AP Public i.e., AP Public and CAZ Public go up and down completely randomly.

Pair Corralation between AP Public and CAZ Public

Assuming the 90 days horizon AP Public is expected to generate 0.8 times more return on investment than CAZ Public. However, AP Public is 1.25 times less risky than CAZ Public. It trades about 0.06 of its potential returns per unit of risk. CAZ Public is currently generating about -0.16 per unit of risk. If you would invest  810.00  in AP Public on December 29, 2024 and sell it today you would earn a total of  50.00  from holding AP Public or generate 6.17% return on investment over 90 days.

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

AP Public  vs.  CAZ Public

AP Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, AP Public may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CAZ Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAZ Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with AP Public and CAZ Public

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

The idea behind AP Public and CAZ Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.