Correlation Between Paramount Communications and Power Finance
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By analyzing existing cross correlation between Paramount Communications Limited and Power Finance, you can compare the effects of market volatilities on Paramount Communications and Power Finance 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 Paramount Communications with a short position of Power Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Communications and Power Finance.
Diversification Opportunities for Paramount Communications and Power Finance
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Paramount and Power is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance and Paramount Communications 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 Paramount Communications Limited are associated (or correlated) with Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Paramount Communications i.e., Paramount Communications and Power Finance go up and down completely randomly.
Pair Corralation between Paramount Communications and Power Finance
Assuming the 90 days trading horizon Paramount Communications is expected to generate 1.67 times less return on investment than Power Finance. In addition to that, Paramount Communications is 1.13 times more volatile than Power Finance. It trades about 0.05 of its total potential returns per unit of risk. Power Finance is currently generating about 0.1 per unit of volatility. If you would invest 11,679 in Power Finance on December 5, 2024 and sell it today you would earn a total of 26,651 from holding Power Finance or generate 228.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paramount Communications Limit vs. Power Finance
Performance |
| Timeline |
| Paramount Communications |
| Power Finance |
Paramount Communications and Power Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paramount Communications and Power Finance
The main advantage of trading using opposite Paramount Communications and Power Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Communications position performs unexpectedly, Power Finance 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 Power Finance will offset losses from the drop in Power Finance's long position.The idea behind Paramount Communications Limited and Power Finance 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.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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