Correlation Between Embrace Change and All American

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

By analyzing existing cross correlation between Embrace Change Acquisition and All American Pet, you can compare the effects of market volatilities on Embrace Change and All American 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 Embrace Change with a short position of All American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and All American.

Diversification Opportunities for Embrace Change and All American

0.0

Correlation Coefficient

Embrace Change  All American

Pay attention - limited upside

The 3 months correlation between Embrace and All is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and All American Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Pet and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Pet has no effect on the direction of Embrace Change i.e., Embrace Change and All American go up and down completely randomly.

Pair Corralation between Embrace Change and All American

Given the investment horizon of 90 days Embrace Change is expected to generate 151.82 times less return on investment than All American. But when comparing it to its historical volatility, Embrace Change Acquisition is 254.75 times less risky than All American. It trades about 0.12 of its potential returns per unit of risk. All American Pet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.03  in All American Pet on September 27, 2024 and sell it today you would lose (0.02) from holding All American Pet or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Embrace Change Acquisition  vs.  All American Pet

Embrace Change Acqui

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Embrace Change and All American

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

The idea behind Embrace Change Acquisition and All American Pet 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.