Correlation Between Innowireless and PJ Metal

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

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

Diversification Opportunities for Innowireless and PJ Metal

-0.57

Correlation Coefficient

Innowireless  PJ Metal

Excellent diversification

The 3 months correlation between Innowireless and 128660 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Innowireless Co and PJ Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Metal and Innowireless 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 Innowireless Co are associated (or correlated) with PJ Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Metal has no effect on the direction of Innowireless i.e., Innowireless and PJ Metal go up and down completely randomly.

Pair Corralation between Innowireless and PJ Metal

Assuming the 90 days trading horizon Innowireless Co is expected to under-perform the PJ Metal. But the stock apears to be less risky and, when comparing its historical volatility, Innowireless Co is 1.4 times less risky than PJ Metal. The stock trades about -0.03 of its potential returns per unit of risk. The PJ Metal Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  301,147  in PJ Metal Co on October 4, 2024 and sell it today you would earn a total of  353.00  from holding PJ Metal Co or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.82%
Values	Daily Returns

Innowireless Co  vs.  PJ Metal Co

Innowireless

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innowireless Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innowireless sustained solid returns over the last few months and may actually be approaching a breakup point.

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Metal 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.

Pair Trading with Innowireless and PJ Metal

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

The idea behind Innowireless Co and PJ Metal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.