Correlation Between ABCD and American Public

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

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

Diversification Opportunities for ABCD and American Public

0.0

Correlation Coefficient

ABCD  American Public

Pay attention - limited upside

The 3 months correlation between ABCD and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ABCD and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education and ABCD 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 ABCD are associated (or correlated) with American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of ABCD i.e., ABCD and American Public go up and down completely randomly.

Pair Corralation between ABCD and American Public

If you would invest  2,057  in American Public Education on January 18, 2024 and sell it today you would lose (805.00) from holding American Public Education or give up 39.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ABCD  vs.  American Public Education

ABCD

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Public Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABCD and American Public

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

The idea behind ABCD and American Public Education 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.