Correlation Between A1 and USCorp

Can any of the company-specific risk be diversified away by investing in both A1 and USCorp 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 A1 and USCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between A1 Group and USCorp, you can compare the effects of market volatilities on A1 and USCorp 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 A1 with a short position of USCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of A1 and USCorp.

Diversification Opportunities for A1 and USCorp

0.0

Correlation Coefficient

A1  USCorp

Pay attention - limited upside

The 3 months correlation between A1 and USCorp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding A1 Group and USCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCorp and A1 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 A1 Group are associated (or correlated) with USCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCorp has no effect on the direction of A1 i.e., A1 and USCorp go up and down completely randomly.

Pair Corralation between A1 and USCorp

Given the investment horizon of 90 days A1 Group is expected to generate 1.44 times more return on investment than USCorp. However, A1 is 1.44 times more volatile than USCorp. It trades about 0.06 of its potential returns per unit of risk. USCorp is currently generating about -0.02 per unit of risk. If you would invest  0.39  in A1 Group on September 4, 2024 and sell it today you would lose (0.16) from holding A1 Group or give up 41.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

A1 Group  vs.  USCorp

A1 Group

Risk-Adjusted Performance

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Very Weak

Over the last 90 days A1 Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with A1 and USCorp

The main advantage of trading using opposite A1 and USCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A1 position performs unexpectedly, USCorp 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 USCorp will offset losses from the drop in USCorp's long position.

The idea behind A1 Group and USCorp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.