Correlation Between Partron and PJ Electronics

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

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

Diversification Opportunities for Partron and PJ Electronics

0.82

Correlation Coefficient

Partron  PJ Electronics

Very poor diversification

The 3 months correlation between Partron and 006140 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Partron Co and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and Partron 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 Partron Co 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 Partron i.e., Partron and PJ Electronics go up and down completely randomly.

Pair Corralation between Partron and PJ Electronics

Assuming the 90 days trading horizon Partron is expected to generate 9.09 times less return on investment than PJ Electronics. But when comparing it to its historical volatility, Partron Co is 2.56 times less risky than PJ Electronics. It trades about 0.06 of its potential returns per unit of risk. PJ Electronics Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  433,789  in PJ Electronics Co on December 1, 2024 and sell it today you would earn a total of  163,211  from holding PJ Electronics Co or generate 37.62% return on investment over 90 days.

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

Partron Co  vs.  PJ Electronics Co

Partron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Partron Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Partron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 17 (%) 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 Partron and PJ Electronics

The main advantage of trading using opposite Partron and PJ Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Partron 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 Partron Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.