Correlation Between Ammo Preferred and VSE

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

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

Diversification Opportunities for Ammo Preferred and VSE

0.43

Correlation Coefficient

Ammo Preferred  VSE

Very weak diversification

The 3 months correlation between Ammo and VSE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ammo Preferred and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation and Ammo Preferred 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 Preferred 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 Preferred i.e., Ammo Preferred and VSE go up and down completely randomly.

Pair Corralation between Ammo Preferred and VSE

Assuming the 90 days horizon Ammo Preferred is expected to generate 9.84 times less return on investment than VSE. But when comparing it to its historical volatility, Ammo Preferred is 1.51 times less risky than VSE. It trades about 0.02 of its potential returns per unit of risk. VSE Corporation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,215  in VSE Corporation on December 4, 2024 and sell it today you would earn a total of  1,177  from holding VSE Corporation or generate 11.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Ammo Preferred  vs.  VSE Corp.

Ammo Preferred

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ammo Preferred are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Ammo Preferred may actually be approaching a critical reversion point that can send shares even higher in April 2025.

VSE Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days VSE Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, VSE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ammo Preferred and VSE

The main advantage of trading using opposite Ammo Preferred and VSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ammo Preferred 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 Preferred 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.