Correlation Between PJ Metal and E Mart

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

Diversification Opportunities for PJ Metal and E Mart

-0.36

Correlation Coefficient

PJ Metal  E Mart

Very good diversification

The 3 months correlation between 128660 and 139480 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and E Mart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mart 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 E Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mart has no effect on the direction of PJ Metal i.e., PJ Metal and E Mart go up and down completely randomly.

Pair Corralation between PJ Metal and E Mart

Assuming the 90 days trading horizon PJ Metal Co is expected to generate 0.55 times more return on investment than E Mart. However, PJ Metal Co is 1.81 times less risky than E Mart. It trades about 0.44 of its potential returns per unit of risk. E Mart is currently generating about 0.13 per unit of risk. If you would invest  250,750  in PJ Metal Co on October 10, 2024 and sell it today you would earn a total of  50,750  from holding PJ Metal Co or generate 20.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

PJ Metal Co  vs.  E Mart

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

E Mart

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with PJ Metal and E Mart

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

The idea behind PJ Metal Co and E Mart 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.