Correlation Between PI Advanced and Microfriend
Can any of the company-specific risk be diversified away by investing in both PI Advanced and Microfriend 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 PI Advanced and Microfriend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PI Advanced Materials and Microfriend, you can compare the effects of market volatilities on PI Advanced and Microfriend 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 PI Advanced with a short position of Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of PI Advanced and Microfriend.
Diversification Opportunities for PI Advanced and Microfriend
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 178920 and Microfriend is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PI Advanced Materials and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and PI Advanced 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 PI Advanced Materials are associated (or correlated) with Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of PI Advanced i.e., PI Advanced and Microfriend go up and down completely randomly.
Pair Corralation between PI Advanced and Microfriend
Assuming the 90 days trading horizon PI Advanced Materials is expected to generate 1.36 times more return on investment than Microfriend. However, PI Advanced is 1.36 times more volatile than Microfriend. It trades about -0.16 of its potential returns per unit of risk. Microfriend is currently generating about -0.44 per unit of risk. If you would invest 1,942,000 in PI Advanced Materials on September 5, 2024 and sell it today you would lose (325,000) from holding PI Advanced Materials or give up 16.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PI Advanced Materials vs. Microfriend
Performance |
| Timeline |
| PI Advanced Materials |
| Microfriend |
PI Advanced and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PI Advanced and Microfriend
The main advantage of trading using opposite PI Advanced and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PI Advanced position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| PI Advanced vs. PJ Metal Co | PI Advanced vs. Taeyang Metal Industrial | PI Advanced vs. Kukil Metal Co | PI Advanced vs. Lotte Data Communication |
| Microfriend vs. SK Hynix | Microfriend vs. LX Semicon Co | Microfriend vs. Tokai Carbon Korea | Microfriend vs. People Technology |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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