Correlation Between PJ Metal and TOPMATERIAL

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

Diversification Opportunities for PJ Metal and TOPMATERIAL

0.54

Correlation Coefficient

PJ Metal  TOPMATERIAL

Very weak diversification

The 3 months correlation between 128660 and TOPMATERIAL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and TOPMATERIAL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOPMATERIAL LTD 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 TOPMATERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOPMATERIAL LTD has no effect on the direction of PJ Metal i.e., PJ Metal and TOPMATERIAL go up and down completely randomly.

Pair Corralation between PJ Metal and TOPMATERIAL

Assuming the 90 days trading horizon PJ Metal is expected to generate 3.34 times less return on investment than TOPMATERIAL. But when comparing it to its historical volatility, PJ Metal Co is 3.73 times less risky than TOPMATERIAL. It trades about 0.08 of its potential returns per unit of risk. TOPMATERIAL LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,650,000  in TOPMATERIAL LTD on December 26, 2024 and sell it today you would earn a total of  400,000  from holding TOPMATERIAL LTD or generate 15.09% 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.  TOPMATERIAL LTD

PJ Metal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Metal Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PJ Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TOPMATERIAL LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TOPMATERIAL LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOPMATERIAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJ Metal and TOPMATERIAL

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

The idea behind PJ Metal Co and TOPMATERIAL LTD 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.