Correlation Between ES Ceramics and PMB Technology

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

Diversification Opportunities for ES Ceramics and PMB Technology

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between 0100 and PMB is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and PMB Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMB Technology Bhd and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with PMB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMB Technology Bhd has no effect on the direction of ES Ceramics i.e., ES Ceramics and PMB Technology go up and down completely randomly.

Pair Corralation between ES Ceramics and PMB Technology

Assuming the 90 days trading horizon ES Ceramics Technology is expected to generate 1.2 times more return on investment than PMB Technology. However, ES Ceramics is 1.2 times more volatile than PMB Technology Bhd. It trades about -0.03 of its potential returns per unit of risk. PMB Technology Bhd is currently generating about -0.05 per unit of risk. If you would invest  16.00  in ES Ceramics Technology on August 31, 2024 and sell it today you would lose (2.00) from holding ES Ceramics Technology or give up 12.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ES Ceramics Technology  vs.  PMB Technology Bhd

 Performance 
       Timeline  
ES Ceramics Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ES Ceramics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
PMB Technology Bhd 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PMB Technology Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

ES Ceramics and PMB Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ES Ceramics and PMB Technology

The main advantage of trading using opposite ES Ceramics and PMB Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ES Ceramics position performs unexpectedly, PMB Technology 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 PMB Technology will offset losses from the drop in PMB Technology's long position.
The idea behind ES Ceramics Technology and PMB Technology Bhd 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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