Correlation Between Public Power and Alpha Services

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

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

Diversification Opportunities for Public Power and Alpha Services

0.76

Correlation Coefficient

Public Power  Alpha Services

Poor diversification

The 3 months correlation between Public and Alpha is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Public Power and Alpha Services and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Services and Public Power 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 Public Power are associated (or correlated) with Alpha Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Services has no effect on the direction of Public Power i.e., Public Power and Alpha Services go up and down completely randomly.

Pair Corralation between Public Power and Alpha Services

Assuming the 90 days trading horizon Public Power is expected to generate 0.79 times more return on investment than Alpha Services. However, Public Power is 1.27 times less risky than Alpha Services. It trades about -0.04 of its potential returns per unit of risk. Alpha Services and is currently generating about -0.03 per unit of risk. If you would invest  1,134  in Public Power on March 9, 2024 and sell it today you would lose (19.00) from holding Public Power or give up 1.68% of portfolio value over 90 days.

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

Public Power  vs.  Alpha Services and

Public Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Public Power is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alpha Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Services and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alpha Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Public Power and Alpha Services

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

The idea behind Public Power and Alpha Services and 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .