Correlation Between Phoenix Materials and Finetechnix CoLtd

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

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

Diversification Opportunities for Phoenix Materials and Finetechnix CoLtd

0.81

Correlation Coefficient

Phoenix Materials  Finetechnix CoLtd

Very poor diversification

The 3 months correlation between Phoenix and Finetechnix is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Materials Co and Finetechnix CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finetechnix CoLtd and Phoenix Materials 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 Phoenix Materials Co are associated (or correlated) with Finetechnix CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finetechnix CoLtd has no effect on the direction of Phoenix Materials i.e., Phoenix Materials and Finetechnix CoLtd go up and down completely randomly.

Pair Corralation between Phoenix Materials and Finetechnix CoLtd

Assuming the 90 days trading horizon Phoenix Materials Co is expected to under-perform the Finetechnix CoLtd. In addition to that, Phoenix Materials is 1.39 times more volatile than Finetechnix CoLtd. It trades about -0.02 of its total potential returns per unit of risk. Finetechnix CoLtd is currently generating about -0.02 per unit of volatility. If you would invest  136,400  in Finetechnix CoLtd on October 8, 2024 and sell it today you would lose (24,500) from holding Finetechnix CoLtd or give up 17.96% of portfolio value over 90 days.

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

Phoenix Materials Co  vs.  Finetechnix CoLtd

Phoenix Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phoenix Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Finetechnix CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finetechnix CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Finetechnix CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Phoenix Materials and Finetechnix CoLtd

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

The idea behind Phoenix Materials Co and Finetechnix CoLtd 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.