Correlation Between Sunspring Metal and Pontex Polyblend
Can any of the company-specific risk be diversified away by investing in both Sunspring Metal and Pontex Polyblend 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 Sunspring Metal and Pontex Polyblend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunspring Metal Corp and Pontex Polyblend CoLtd, you can compare the effects of market volatilities on Sunspring Metal and Pontex Polyblend 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 Sunspring Metal with a short position of Pontex Polyblend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunspring Metal and Pontex Polyblend.
Diversification Opportunities for Sunspring Metal and Pontex Polyblend
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sunspring and Pontex is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sunspring Metal Corp and Pontex Polyblend CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pontex Polyblend CoLtd and Sunspring Metal 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 Sunspring Metal Corp are associated (or correlated) with Pontex Polyblend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pontex Polyblend CoLtd has no effect on the direction of Sunspring Metal i.e., Sunspring Metal and Pontex Polyblend go up and down completely randomly.
Pair Corralation between Sunspring Metal and Pontex Polyblend
Assuming the 90 days trading horizon Sunspring Metal Corp is expected to under-perform the Pontex Polyblend. In addition to that, Sunspring Metal is 1.46 times more volatile than Pontex Polyblend CoLtd. It trades about -0.06 of its total potential returns per unit of risk. Pontex Polyblend CoLtd is currently generating about 0.18 per unit of volatility. If you would invest 2,210 in Pontex Polyblend CoLtd on November 5, 2024 and sell it today you would earn a total of 80.00 from holding Pontex Polyblend CoLtd or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunspring Metal Corp vs. Pontex Polyblend CoLtd
Performance |
| Timeline |
| Sunspring Metal Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Pontex Polyblend CoLtd |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Sunspring Metal and Pontex Polyblend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunspring Metal and Pontex Polyblend
The main advantage of trading using opposite Sunspring Metal and Pontex Polyblend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunspring Metal position performs unexpectedly, Pontex Polyblend 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 Pontex Polyblend will offset losses from the drop in Pontex Polyblend's long position.The idea behind Sunspring Metal Corp and Pontex Polyblend CoLtd 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.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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