Correlation Between Molekule and Acme United

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

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

Diversification Opportunities for Molekule and Acme United

-0.3

Correlation Coefficient

Molekule  Acme United

Very good diversification

The 3 months correlation between Molekule and Acme is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Molekule Group and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United and Molekule 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 Molekule Group are associated (or correlated) with Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of Molekule i.e., Molekule and Acme United go up and down completely randomly.

Pair Corralation between Molekule and Acme United

Given the investment horizon of 90 days Molekule is expected to generate 7.27 times less return on investment than Acme United. In addition to that, Molekule is 2.19 times more volatile than Acme United. It trades about 0.0 of its total potential returns per unit of risk. Acme United is currently generating about 0.05 per unit of volatility. If you would invest  2,252  in Acme United on October 23, 2024 and sell it today you would earn a total of  1,468  from holding Acme United or generate 65.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.09%
Values	Daily Returns

Molekule Group  vs.  Acme United

Molekule Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molekule Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Molekule is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Acme United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental 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 Molekule and Acme United

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

The idea behind Molekule Group and Acme United 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.