Correlation Between APS Holdings and ICD

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

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

Diversification Opportunities for APS Holdings and ICD

-0.27

Correlation Coefficient

APS Holdings  ICD

Very good diversification

The 3 months correlation between APS and ICD is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding APS Holdings and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co and APS Holdings 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 APS Holdings are associated (or correlated) with ICD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of APS Holdings i.e., APS Holdings and ICD go up and down completely randomly.

Pair Corralation between APS Holdings and ICD

Assuming the 90 days trading horizon APS Holdings is expected to generate 0.72 times more return on investment than ICD. However, APS Holdings is 1.4 times less risky than ICD. It trades about -0.02 of its potential returns per unit of risk. ICD Co is currently generating about -0.15 per unit of risk. If you would invest  588,000  in APS Holdings on September 1, 2024 and sell it today you would lose (18,000) from holding APS Holdings or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

APS Holdings  vs.  ICD Co

APS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with APS Holdings and ICD

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

The idea behind APS Holdings and ICD Co 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.