Correlation Between Pacific Pipe and CK Power
Can any of the company-specific risk be diversified away by investing in both Pacific Pipe and CK Power 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 Pacific Pipe and CK Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Pipe Public and CK Power Public, you can compare the effects of market volatilities on Pacific Pipe and CK Power 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 Pacific Pipe with a short position of CK Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Pipe and CK Power.
Diversification Opportunities for Pacific Pipe and CK Power
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pacific and CKP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Pipe Public and CK Power Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Power Public and Pacific Pipe 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 Pacific Pipe Public are associated (or correlated) with CK Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Power Public has no effect on the direction of Pacific Pipe i.e., Pacific Pipe and CK Power go up and down completely randomly.
Pair Corralation between Pacific Pipe and CK Power
Assuming the 90 days trading horizon Pacific Pipe Public is expected to under-perform the CK Power. In addition to that, Pacific Pipe is 1.26 times more volatile than CK Power Public. It trades about -0.05 of its total potential returns per unit of risk. CK Power Public is currently generating about -0.03 per unit of volatility. If you would invest 457.00 in CK Power Public on August 29, 2024 and sell it today you would lose (131.00) from holding CK Power Public or give up 28.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacific Pipe Public vs. CK Power Public
Performance |
| Timeline |
| Pacific Pipe Public |
| CK Power Public |
Pacific Pipe and CK Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Pipe and CK Power
The main advantage of trading using opposite Pacific Pipe and CK Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Pipe position performs unexpectedly, CK Power 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 CK Power will offset losses from the drop in CK Power's long position.| Pacific Pipe vs. 2S Metal Public | Pacific Pipe vs. AAPICO Hitech Public | Pacific Pipe vs. AJ Plast Public |
| CK Power vs. Energy Absolute Public | CK Power vs. BCPG Public | CK Power vs. Bangkok Expressway and | CK Power vs. Gulf Energy Development |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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