Correlation Between PJ Metal and Fine Besteel

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

Diversification Opportunities for PJ Metal and Fine Besteel

-0.11

Correlation Coefficient

PJ Metal  Fine Besteel

Good diversification

The 3 months correlation between 128660 and Fine is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and Fine Besteel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Besteel 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 Fine Besteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Besteel has no effect on the direction of PJ Metal i.e., PJ Metal and Fine Besteel go up and down completely randomly.

Pair Corralation between PJ Metal and Fine Besteel

Assuming the 90 days trading horizon PJ Metal Co is expected to under-perform the Fine Besteel. In addition to that, PJ Metal is 1.07 times more volatile than Fine Besteel Co. It trades about -0.01 of its total potential returns per unit of risk. Fine Besteel Co is currently generating about 0.09 per unit of volatility. If you would invest  91,000  in Fine Besteel Co on September 2, 2024 and sell it today you would earn a total of  13,700  from holding Fine Besteel Co or generate 15.05% 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.  Fine Besteel 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 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.

Fine Besteel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJ Metal and Fine Besteel

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

The idea behind PJ Metal Co and Fine Besteel 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.