Correlation Between Ammo and VSE

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

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

Diversification Opportunities for Ammo and VSE

-0.65

Correlation Coefficient

Ammo  VSE

Excellent diversification

The 3 months correlation between Ammo and VSE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ammo Inc and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Ammo 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 Ammo Inc are associated (or correlated) with VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Ammo i.e., Ammo and VSE go up and down completely randomly.

Pair Corralation between Ammo and VSE

Given the investment horizon of 90 days Ammo Inc is expected to under-perform the VSE. In addition to that, Ammo is 1.78 times more volatile than VSE Corporation. It trades about -0.16 of its total potential returns per unit of risk. VSE Corporation is currently generating about -0.16 per unit of volatility. If you would invest  11,744  in VSE Corporation on September 15, 2024 and sell it today you would lose (923.00) from holding VSE Corporation or give up 7.86% of portfolio value over 90 days.

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

Ammo Inc  vs.  VSE Corp.

Ammo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ammo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

VSE Corporation

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Ammo and VSE

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

The idea behind Ammo Inc and VSE Corporation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.