Correlation Between AP Public and I Tail

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

By analyzing existing cross correlation between AP Public and i Tail Corp PCL, you can compare the effects of market volatilities on AP Public and I Tail 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 AP Public with a short position of I Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Public and I Tail.

Diversification Opportunities for AP Public and I Tail

0.43

Correlation Coefficient

AP Public  I Tail

Very weak diversification

The 3 months correlation between AP Public and ITC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AP Public and i Tail Corp PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i Tail Corp and AP Public 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 AP Public are associated (or correlated) with I Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i Tail Corp has no effect on the direction of AP Public i.e., AP Public and I Tail go up and down completely randomly.

Pair Corralation between AP Public and I Tail

Assuming the 90 days horizon AP Public is expected to under-perform the I Tail. But the stock apears to be less risky and, when comparing its historical volatility, AP Public is 1.27 times less risky than I Tail. The stock trades about -0.07 of its potential returns per unit of risk. The i Tail Corp PCL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,950  in i Tail Corp PCL on September 13, 2024 and sell it today you would earn a total of  220.00  from holding i Tail Corp PCL or generate 11.28% return on investment over 90 days.

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

AP Public  vs.  i Tail Corp PCL

AP Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

i Tail Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Tail Corp PCL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, I Tail disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Public and I Tail

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

The idea behind AP Public and i Tail Corp PCL 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.