Correlation Between DB Financial and PJ Electronics

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

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

Diversification Opportunities for DB Financial and PJ Electronics

0.84

Correlation Coefficient

DB Financial  PJ Electronics

Very poor diversification

The 3 months correlation between 016610 and 006140 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and DB Financial 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 DB Financial Investment are associated (or correlated) with PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of DB Financial i.e., DB Financial and PJ Electronics go up and down completely randomly.

Pair Corralation between DB Financial and PJ Electronics

Assuming the 90 days trading horizon DB Financial is expected to generate 2.98 times less return on investment than PJ Electronics. But when comparing it to its historical volatility, DB Financial Investment is 2.48 times less risky than PJ Electronics. It trades about 0.15 of its potential returns per unit of risk. PJ Electronics Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  444,500  in PJ Electronics Co on December 25, 2024 and sell it today you would earn a total of  128,500  from holding PJ Electronics Co or generate 28.91% return on investment over 90 days.

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

DB Financial Investment  vs.  PJ Electronics Co

DB Financial Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PJ Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Electronics Co are ranked lower than 14 (%) 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.

Pair Trading with DB Financial and PJ Electronics

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

The idea behind DB Financial Investment and PJ Electronics Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.