Correlation Between PLASTIC INDUSTRY and QUALITY BEVERAGES
Can any of the company-specific risk be diversified away by investing in both PLASTIC INDUSTRY and QUALITY BEVERAGES 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 PLASTIC INDUSTRY and QUALITY BEVERAGES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLASTIC INDUSTRY LTD and QUALITY BEVERAGES LTD, you can compare the effects of market volatilities on PLASTIC INDUSTRY and QUALITY BEVERAGES 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 PLASTIC INDUSTRY with a short position of QUALITY BEVERAGES. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLASTIC INDUSTRY and QUALITY BEVERAGES.
Diversification Opportunities for PLASTIC INDUSTRY and QUALITY BEVERAGES
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PLASTIC and QUALITY is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PLASTIC INDUSTRY LTD and QUALITY BEVERAGES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALITY BEVERAGES LTD and PLASTIC INDUSTRY 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 PLASTIC INDUSTRY LTD are associated (or correlated) with QUALITY BEVERAGES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALITY BEVERAGES LTD has no effect on the direction of PLASTIC INDUSTRY i.e., PLASTIC INDUSTRY and QUALITY BEVERAGES go up and down completely randomly.
Pair Corralation between PLASTIC INDUSTRY and QUALITY BEVERAGES
Assuming the 90 days trading horizon PLASTIC INDUSTRY LTD is expected to generate 2.28 times more return on investment than QUALITY BEVERAGES. However, PLASTIC INDUSTRY is 2.28 times more volatile than QUALITY BEVERAGES LTD. It trades about 0.11 of its potential returns per unit of risk. QUALITY BEVERAGES LTD is currently generating about 0.2 per unit of risk. If you would invest 3,900 in PLASTIC INDUSTRY LTD on August 30, 2024 and sell it today you would earn a total of 450.00 from holding PLASTIC INDUSTRY LTD or generate 11.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
PLASTIC INDUSTRY LTD vs. QUALITY BEVERAGES LTD
Performance |
| Timeline |
| PLASTIC INDUSTRY LTD |
| QUALITY BEVERAGES LTD |
PLASTIC INDUSTRY and QUALITY BEVERAGES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PLASTIC INDUSTRY and QUALITY BEVERAGES
The main advantage of trading using opposite PLASTIC INDUSTRY and QUALITY BEVERAGES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLASTIC INDUSTRY position performs unexpectedly, QUALITY BEVERAGES 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 QUALITY BEVERAGES will offset losses from the drop in QUALITY BEVERAGES's long position.| PLASTIC INDUSTRY vs. FINCORP INVESTMENT LTD | PLASTIC INDUSTRY vs. PSG FINANCIAL SERVICES | PLASTIC INDUSTRY vs. NEW MAURITIUS HOTELS | PLASTIC INDUSTRY vs. MIWA SUGAR LIMITED |
| QUALITY BEVERAGES vs. FINCORP INVESTMENT LTD | QUALITY BEVERAGES vs. PSG FINANCIAL SERVICES | QUALITY BEVERAGES vs. NEW MAURITIUS HOTELS | QUALITY BEVERAGES vs. MIWA SUGAR LIMITED |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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