Correlation Between Promate Electronic and President Chain
Can any of the company-specific risk be diversified away by investing in both Promate Electronic and President Chain 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 Promate Electronic and President Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promate Electronic Co and President Chain Store, you can compare the effects of market volatilities on Promate Electronic and President Chain 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 Promate Electronic with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promate Electronic and President Chain.
Diversification Opportunities for Promate Electronic and President Chain
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Promate and President is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Promate Electronic Co and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Promate Electronic 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 Promate Electronic Co are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Promate Electronic i.e., Promate Electronic and President Chain go up and down completely randomly.
Pair Corralation between Promate Electronic and President Chain
Assuming the 90 days trading horizon Promate Electronic Co is expected to generate 2.73 times more return on investment than President Chain. However, Promate Electronic is 2.73 times more volatile than President Chain Store. It trades about 0.08 of its potential returns per unit of risk. President Chain Store is currently generating about 0.0 per unit of risk. If you would invest 3,594 in Promate Electronic Co on November 5, 2024 and sell it today you would earn a total of 4,246 from holding Promate Electronic Co or generate 118.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Promate Electronic Co vs. President Chain Store
Performance |
| Timeline |
| Promate Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| President Chain Store |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Promate Electronic and President Chain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promate Electronic and President Chain
The main advantage of trading using opposite Promate Electronic and President Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promate Electronic position performs unexpectedly, President Chain 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 President Chain will offset losses from the drop in President Chain's long position.The idea behind Promate Electronic Co and President Chain Store 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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