Correlation Between True Public and AP Public

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

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

Diversification Opportunities for True Public and AP Public

-0.43

Correlation Coefficient

True Public  AP Public

Very good diversification

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

Pair Corralation between True Public and AP Public

Assuming the 90 days trading horizon True Public is expected to generate 1.53 times more return on investment than AP Public. However, True Public is 1.53 times more volatile than AP Public. It trades about 0.14 of its potential returns per unit of risk. AP Public is currently generating about -0.03 per unit of risk. If you would invest  580.00  in True Public on February 12, 2024 and sell it today you would earn a total of  235.00  from holding True Public or generate 40.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.64%
Values	Daily Returns

True Public  vs.  AP Public

True Public

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in True Public are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, True Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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.

Pair Trading with True Public and AP Public

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

The idea behind True Public and AP Public 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.