Correlation Between ACI Worldwide and Robinhood Markets

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

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

Diversification Opportunities for ACI Worldwide and Robinhood Markets

0.87

Correlation Coefficient

ACI Worldwide  Robinhood Markets

Very poor diversification

The 3 months correlation between ACI and Robinhood is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ACI Worldwide and Robinhood Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robinhood Markets and ACI Worldwide 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 ACI Worldwide are associated (or correlated) with Robinhood Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robinhood Markets has no effect on the direction of ACI Worldwide i.e., ACI Worldwide and Robinhood Markets go up and down completely randomly.

Pair Corralation between ACI Worldwide and Robinhood Markets

Given the investment horizon of 90 days ACI Worldwide is expected to generate 3.11 times less return on investment than Robinhood Markets. But when comparing it to its historical volatility, ACI Worldwide is 1.6 times less risky than Robinhood Markets. It trades about 0.02 of its potential returns per unit of risk. Robinhood Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,048  in Robinhood Markets on January 20, 2024 and sell it today you would earn a total of  660.00  from holding Robinhood Markets or generate 62.98% return on investment over 90 days.

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

ACI Worldwide  vs.  Robinhood Markets

ACI Worldwide

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACI Worldwide are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, ACI Worldwide is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Robinhood Markets

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Robinhood Markets are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Robinhood Markets exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACI Worldwide and Robinhood Markets

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

The idea behind ACI Worldwide and Robinhood Markets 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.