Correlation Between Pluristem and PCB Tec

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Can any of the company-specific risk be diversified away by investing in both Pluristem and PCB Tec 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 Pluristem and PCB Tec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pluristem and PCB Tec, you can compare the effects of market volatilities on Pluristem and PCB Tec 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 Pluristem with a short position of PCB Tec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pluristem and PCB Tec.

Diversification Opportunities for Pluristem and PCB Tec

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Pluristem and PCB is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pluristem and PCB Tec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Tec and Pluristem 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 Pluristem are associated (or correlated) with PCB Tec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Tec has no effect on the direction of Pluristem i.e., Pluristem and PCB Tec go up and down completely randomly.

Pair Corralation between Pluristem and PCB Tec

Assuming the 90 days trading horizon Pluristem is expected to generate 1.2 times more return on investment than PCB Tec. However, Pluristem is 1.2 times more volatile than PCB Tec. It trades about 0.18 of its potential returns per unit of risk. PCB Tec is currently generating about 0.08 per unit of risk. If you would invest  161,100  in Pluristem on August 27, 2024 and sell it today you would earn a total of  25,000  from holding Pluristem or generate 15.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pluristem  vs.  PCB Tec

 Performance 
       Timeline  
Pluristem 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Pluristem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pluristem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
PCB Tec 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PCB Tec are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PCB Tec sustained solid returns over the last few months and may actually be approaching a breakup point.

Pluristem and PCB Tec Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pluristem and PCB Tec

The main advantage of trading using opposite Pluristem and PCB Tec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pluristem position performs unexpectedly, PCB Tec 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 PCB Tec will offset losses from the drop in PCB Tec's long position.
The idea behind Pluristem and PCB Tec 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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