Correlation Between Public Company and USCorp

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

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

Diversification Opportunities for Public Company and USCorp

-0.44

Correlation Coefficient

Public Company  USCorp

Very good diversification

The 3 months correlation between Public and USCorp is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Public Company Management and USCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCorp and Public Company 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 Public Company Management are associated (or correlated) with USCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCorp has no effect on the direction of Public Company i.e., Public Company and USCorp go up and down completely randomly.

Pair Corralation between Public Company and USCorp

Given the investment horizon of 90 days Public Company Management is expected to under-perform the USCorp. In addition to that, Public Company is 1.18 times more volatile than USCorp. It trades about -0.01 of its total potential returns per unit of risk. USCorp is currently generating about 0.16 per unit of volatility. If you would invest  0.01  in USCorp on October 7, 2024 and sell it today you would earn a total of  0.01  from holding USCorp or generate 100.0% return on investment over 90 days.

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

Public Company Management  vs.  USCorp

Public Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Public Company Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Public Company exhibited solid returns over the last few months and may actually be approaching a breakup point.

USCorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, USCorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Public Company and USCorp

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

The idea behind Public Company Management and USCorp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.