Correlation Between VSE and Ammo

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

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

Diversification Opportunities for VSE and Ammo

-0.63

Correlation Coefficient

VSE  Ammo

Excellent diversification

The 3 months correlation between VSE and Ammo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding VSE Corp. and Ammo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ammo Inc and VSE 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 VSE Corporation are associated (or correlated) with Ammo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ammo Inc has no effect on the direction of VSE i.e., VSE and Ammo go up and down completely randomly.

Pair Corralation between VSE and Ammo

Given the investment horizon of 90 days VSE Corporation is expected to generate 0.83 times more return on investment than Ammo. However, VSE Corporation is 1.2 times less risky than Ammo. It trades about 0.16 of its potential returns per unit of risk. Ammo Inc is currently generating about -0.05 per unit of risk. If you would invest  8,758  in VSE Corporation on September 2, 2024 and sell it today you would earn a total of  2,968  from holding VSE Corporation or generate 33.89% return on investment over 90 days.

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

VSE Corp.  vs.  Ammo Inc

VSE Corporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 12 (%) 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.

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 latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with VSE and Ammo

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

The idea behind VSE Corporation and Ammo Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.