Correlation Between PHN Multi and Tarku Resources

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

By analyzing existing cross correlation between PHN Multi Style All Cap and Tarku Resources, you can compare the effects of market volatilities on PHN Multi and Tarku Resources 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 PHN Multi with a short position of Tarku Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Multi and Tarku Resources.

Diversification Opportunities for PHN Multi and Tarku Resources

0.1

Correlation Coefficient

PHN Multi  Tarku Resources

Average diversification

The 3 months correlation between PHN and Tarku is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PHN Multi Style All Cap and Tarku Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarku Resources and PHN Multi 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 PHN Multi Style All Cap are associated (or correlated) with Tarku Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarku Resources has no effect on the direction of PHN Multi i.e., PHN Multi and Tarku Resources go up and down completely randomly.

Pair Corralation between PHN Multi and Tarku Resources

Assuming the 90 days trading horizon PHN Multi Style All Cap is expected to under-perform the Tarku Resources. But the fund apears to be less risky and, when comparing its historical volatility, PHN Multi Style All Cap is 19.11 times less risky than Tarku Resources. The fund trades about -0.07 of its potential returns per unit of risk. The Tarku Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Tarku Resources on December 31, 2024 and sell it today you would lose (0.50) from holding Tarku Resources or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

PHN Multi Style All Cap  vs.  Tarku Resources

PHN Multi Style

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHN Multi Style All Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, PHN Multi is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Tarku Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Tarku Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PHN Multi and Tarku Resources

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

The idea behind PHN Multi Style All Cap and Tarku Resources 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.