Correlation Between Acme United and Deluxe

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

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

Diversification Opportunities for Acme United and Deluxe

0.79

Correlation Coefficient

Acme United  Deluxe

Poor diversification

The 3 months correlation between Acme and Deluxe is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe and Acme United 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 Acme United are associated (or correlated) with Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of Acme United i.e., Acme United and Deluxe go up and down completely randomly.

Pair Corralation between Acme United and Deluxe

Considering the 90-day investment horizon Acme United is expected to generate 0.83 times more return on investment than Deluxe. However, Acme United is 1.2 times less risky than Deluxe. It trades about 0.06 of its potential returns per unit of risk. Deluxe is currently generating about 0.04 per unit of risk. If you would invest  3,760  in Acme United on May 5, 2025 and sell it today you would earn a total of  253.00  from holding Acme United or generate 6.73% return on investment over 90 days.

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

Acme United  vs.  Deluxe

Acme United

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acme United are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Acme United may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Deluxe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Deluxe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Acme United and Deluxe

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

The idea behind Acme United and Deluxe 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.