Correlation Between PJ Metal and Formetal

Can any of the company-specific risk be diversified away by investing in both PJ Metal and Formetal 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 Formetal 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 Formetal Co, you can compare the effects of market volatilities on PJ Metal and Formetal 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 Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Metal and Formetal.

Diversification Opportunities for PJ Metal and Formetal

-0.06

Correlation Coefficient

PJ Metal  Formetal

Good diversification

The 3 months correlation between 128660 and Formetal is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal 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 Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of PJ Metal i.e., PJ Metal and Formetal go up and down completely randomly.

Pair Corralation between PJ Metal and Formetal

Assuming the 90 days trading horizon PJ Metal Co is expected to under-perform the Formetal. But the stock apears to be less risky and, when comparing its historical volatility, PJ Metal Co is 1.68 times less risky than Formetal. The stock trades about -0.09 of its potential returns per unit of risk. The Formetal Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  280,808  in Formetal Co on October 6, 2024 and sell it today you would earn a total of  74,692  from holding Formetal Co or generate 26.6% return on investment over 90 days.

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

PJ Metal Co  vs.  Formetal Co

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJ Metal and Formetal

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

The idea behind PJ Metal Co and Formetal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.