Correlation Between USCorp and Premier Products

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

By analyzing existing cross correlation between USCorp and Premier Products Group, you can compare the effects of market volatilities on USCorp and Premier Products 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 Premier Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of USCorp and Premier Products.

Diversification Opportunities for USCorp and Premier Products

1.0

Correlation Coefficient

USCorp  Premier Products

No risk reduction

The 3 months correlation between USCorp and Premier is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding USCorp and Premier Products Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Products 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 Premier Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Products has no effect on the direction of USCorp i.e., USCorp and Premier Products go up and down completely randomly.

Pair Corralation between USCorp and Premier Products

If you would invest  0.01  in Premier Products Group on September 6, 2024 and sell it today you would earn a total of  0.00  from holding Premier Products Group or generate 0.0% return on investment over 90 days.

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

USCorp  vs.  Premier Products Group

USCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, USCorp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Premier Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Products Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Premier Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with USCorp and Premier Products

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

The idea behind USCorp and Premier Products Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.