Correlation Between PetMed Express and USA Recycling

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

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

Diversification Opportunities for PetMed Express and USA Recycling

-0.64

Correlation Coefficient

PetMed Express  USA Recycling

Excellent diversification

The 3 months correlation between PetMed and USA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PetMed Express and USA Recycling Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Recycling Industries and PetMed Express 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 PetMed Express are associated (or correlated) with USA Recycling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Recycling Industries has no effect on the direction of PetMed Express i.e., PetMed Express and USA Recycling go up and down completely randomly.

Pair Corralation between PetMed Express and USA Recycling

Given the investment horizon of 90 days PetMed Express is expected to under-perform the USA Recycling. But the stock apears to be less risky and, when comparing its historical volatility, PetMed Express is 1.56 times less risky than USA Recycling. The stock trades about -0.06 of its potential returns per unit of risk. The USA Recycling Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  0.13  in USA Recycling Industries on October 13, 2024 and sell it today you would lose (0.12) from holding USA Recycling Industries or give up 92.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

PetMed Express  vs.  USA Recycling Industries

PetMed Express

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetMed Express are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PetMed Express unveiled solid returns over the last few months and may actually be approaching a breakup point.

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with PetMed Express and USA Recycling

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

The idea behind PetMed Express and USA Recycling Industries 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.