Correlation Between PJ Metal and SKONEC Entertainment

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

Diversification Opportunities for PJ Metal and SKONEC Entertainment

0.4

Correlation Coefficient

PJ Metal  SKONEC Entertainment

Very weak diversification

The 3 months correlation between 128660 and SKONEC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and SKONEC Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKONEC Entertainment 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 SKONEC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKONEC Entertainment has no effect on the direction of PJ Metal i.e., PJ Metal and SKONEC Entertainment go up and down completely randomly.

Pair Corralation between PJ Metal and SKONEC Entertainment

Assuming the 90 days trading horizon PJ Metal Co is expected to under-perform the SKONEC Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, PJ Metal Co is 1.77 times less risky than SKONEC Entertainment. The stock trades about -0.01 of its potential returns per unit of risk. The SKONEC Entertainment Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  300,500  in SKONEC Entertainment Co on October 25, 2024 and sell it today you would earn a total of  125,000  from holding SKONEC Entertainment Co or generate 41.6% return on investment over 90 days.

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

PJ Metal Co  vs.  SKONEC Entertainment 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.

SKONEC Entertainment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SKONEC Entertainment Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SKONEC Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJ Metal and SKONEC Entertainment

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

The idea behind PJ Metal Co and SKONEC Entertainment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.