Correlation Between PJ Electronics and SK Chemicals
Can any of the company-specific risk be diversified away by investing in both PJ Electronics and SK Chemicals 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 PJ Electronics and SK Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PJ Electronics Co and SK Chemicals Co, you can compare the effects of market volatilities on PJ Electronics and SK Chemicals 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 PJ Electronics with a short position of SK Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Electronics and SK Chemicals.
Diversification Opportunities for PJ Electronics and SK Chemicals
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 006140 and 28513K is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PJ Electronics Co and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals and PJ Electronics 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 PJ Electronics Co are associated (or correlated) with SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of PJ Electronics i.e., PJ Electronics and SK Chemicals go up and down completely randomly.
Pair Corralation between PJ Electronics and SK Chemicals
Assuming the 90 days trading horizon PJ Electronics Co is expected to generate 2.27 times more return on investment than SK Chemicals. However, PJ Electronics is 2.27 times more volatile than SK Chemicals Co. It trades about -0.16 of its potential returns per unit of risk. SK Chemicals Co is currently generating about -0.47 per unit of risk. If you would invest 509,000 in PJ Electronics Co on September 1, 2024 and sell it today you would lose (55,500) from holding PJ Electronics Co or give up 10.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PJ Electronics Co vs. SK Chemicals Co
Performance |
| Timeline |
| PJ Electronics |
| SK Chemicals |
PJ Electronics and SK Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PJ Electronics and SK Chemicals
The main advantage of trading using opposite PJ Electronics and SK Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PJ Electronics position performs unexpectedly, SK Chemicals 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 SK Chemicals will offset losses from the drop in SK Chemicals' long position.| PJ Electronics vs. Daejoo Electronic Materials | PJ Electronics vs. Parksystems Corp | PJ Electronics vs. BH Co | PJ Electronics vs. Partron Co |
Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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