Correlation Between PJ Metal and SBI Investment

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

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

Diversification Opportunities for PJ Metal and SBI Investment

-0.45

Correlation Coefficient

PJ Metal  SBI Investment

Very good diversification

The 3 months correlation between 128660 and SBI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA and PJ Metal 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 PJ Metal Co are associated (or correlated) with SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of PJ Metal i.e., PJ Metal and SBI Investment go up and down completely randomly.

Pair Corralation between PJ Metal and SBI Investment

Assuming the 90 days trading horizon PJ Metal Co is expected to generate 1.23 times more return on investment than SBI Investment. However, PJ Metal is 1.23 times more volatile than SBI Investment KOREA. It trades about 0.01 of its potential returns per unit of risk. SBI Investment KOREA is currently generating about -0.01 per unit of risk. If you would invest  303,297  in PJ Metal Co on September 21, 2024 and sell it today you would lose (1,797) from holding PJ Metal Co or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PJ Metal Co  vs.  SBI Investment KOREA

PJ Metal

Risk-Adjusted Performance

1 of 100

Weak

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

SBI Investment KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PJ Metal and SBI Investment

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

The idea behind PJ Metal Co and SBI Investment KOREA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.