Correlation Between American Public and Sharp Corp

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

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

Diversification Opportunities for American Public and Sharp Corp

-0.15

Correlation Coefficient

American Public  Sharp Corp

Good diversification

The 3 months correlation between American and Sharp is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Sharp Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharp Corp ADR and American 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 American Public Education are associated (or correlated) with Sharp Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharp Corp ADR has no effect on the direction of American Public i.e., American Public and Sharp Corp go up and down completely randomly.

Pair Corralation between American Public and Sharp Corp

Given the investment horizon of 90 days American Public Education is expected to under-perform the Sharp Corp. In addition to that, American Public is 1.58 times more volatile than Sharp Corp ADR. It trades about -0.3 of its total potential returns per unit of risk. Sharp Corp ADR is currently generating about -0.24 per unit of volatility. If you would invest  155.00  in Sharp Corp ADR on October 16, 2024 and sell it today you would lose (12.00) from holding Sharp Corp ADR or give up 7.74% of portfolio value over 90 days.

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

American Public Education  vs.  Sharp Corp ADR

American Public Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sharp Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sharp Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with American Public and Sharp Corp

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

The idea behind American Public Education and Sharp Corp ADR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.