Correlation Between Basic Materials and PBG SA
Can any of the company-specific risk be diversified away by investing in both Basic Materials and PBG SA 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 Basic Materials and PBG SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and PBG SA, you can compare the effects of market volatilities on Basic Materials and PBG SA 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 Basic Materials with a short position of PBG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and PBG SA.
Diversification Opportunities for Basic Materials and PBG SA
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Basic and PBG is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and PBG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBG SA and Basic Materials 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 Basic Materials are associated (or correlated) with PBG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBG SA has no effect on the direction of Basic Materials i.e., Basic Materials and PBG SA go up and down completely randomly.
Pair Corralation between Basic Materials and PBG SA
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.24 times more return on investment than PBG SA. However, Basic Materials is 4.12 times less risky than PBG SA. It trades about 0.1 of its potential returns per unit of risk. PBG SA is currently generating about 0.02 per unit of risk. If you would invest 575,359 in Basic Materials on September 1, 2024 and sell it today you would earn a total of 12,051 from holding Basic Materials or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. PBG SA
Performance |
| Timeline |
Basic Materials and PBG SA Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
PBG SA
Pair trading matchups for PBG SA
Pair Trading with Basic Materials and PBG SA
The main advantage of trading using opposite Basic Materials and PBG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, PBG SA 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 PBG SA will offset losses from the drop in PBG SA's long position.| Basic Materials vs. GP Investments | Basic Materials vs. TAL Education Group | Basic Materials vs. Deutsche Bank Aktiengesellschaft | Basic Materials vs. STMicroelectronics NV |
| PBG SA vs. METISA Metalrgica Timboense | PBG SA vs. Lupatech SA | PBG SA vs. Fras le SA | PBG SA vs. Energisa SA |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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