Correlation Between USCorp and Atlantic Energy

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

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

Diversification Opportunities for USCorp and Atlantic Energy

-0.27

Correlation Coefficient

USCorp  Atlantic Energy

Very good diversification

The 3 months correlation between USCorp and Atlantic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding USCorp and Atlantic Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Energy Solutions and USCorp 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 USCorp are associated (or correlated) with Atlantic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Energy Solutions has no effect on the direction of USCorp i.e., USCorp and Atlantic Energy go up and down completely randomly.

Pair Corralation between USCorp and Atlantic Energy

Given the investment horizon of 90 days USCorp is expected to generate 1.02 times more return on investment than Atlantic Energy. However, USCorp is 1.02 times more volatile than Atlantic Energy Solutions. It trades about 0.16 of its potential returns per unit of risk. Atlantic Energy Solutions is currently generating about -0.01 per unit of risk. 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	Insignificant
Accuracy	95.35%
Values	Daily Returns

USCorp  vs.  Atlantic Energy Solutions

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.

Atlantic Energy Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Atlantic Energy is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with USCorp and Atlantic Energy

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

The idea behind USCorp and Atlantic Energy Solutions 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.