Correlation Between PJ Electronics and Ecoplastic

Can any of the company-specific risk be diversified away by investing in both PJ Electronics and Ecoplastic 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 PJ Electronics and Ecoplastic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PJ Electronics Co and Ecoplastic, you can compare the effects of market volatilities on PJ Electronics and Ecoplastic 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 PJ Electronics with a short position of Ecoplastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Electronics and Ecoplastic.

Diversification Opportunities for PJ Electronics and Ecoplastic

0.75

Correlation Coefficient

PJ Electronics  Ecoplastic

Poor diversification

The 3 months correlation between 006140 and Ecoplastic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PJ Electronics Co and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic and PJ Electronics 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 PJ Electronics Co are associated (or correlated) with Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of PJ Electronics i.e., PJ Electronics and Ecoplastic go up and down completely randomly.

Pair Corralation between PJ Electronics and Ecoplastic

Assuming the 90 days trading horizon PJ Electronics Co is expected to generate 1.03 times more return on investment than Ecoplastic. However, PJ Electronics is 1.03 times more volatile than Ecoplastic. It trades about 0.24 of its potential returns per unit of risk. Ecoplastic is currently generating about 0.1 per unit of risk. If you would invest  427,460  in PJ Electronics Co on December 5, 2024 and sell it today you would earn a total of  172,540  from holding PJ Electronics Co or generate 40.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PJ Electronics Co  vs.  Ecoplastic

PJ Electronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Electronics Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PJ Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Ecoplastic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecoplastic are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecoplastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJ Electronics and Ecoplastic

The main advantage of trading using opposite PJ Electronics and Ecoplastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PJ Electronics position performs unexpectedly, Ecoplastic 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 Ecoplastic will offset losses from the drop in Ecoplastic's long position.

The idea behind PJ Electronics Co and Ecoplastic 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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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 Anywhere module to track or share privately all of your investments from the convenience of any device.