Correlation Between PlayD and Okins Electronics

Can any of the company-specific risk be diversified away by investing in both PlayD and Okins Electronics 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 PlayD and Okins Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PlayD Co and Okins Electronics Co, you can compare the effects of market volatilities on PlayD and Okins Electronics 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 PlayD with a short position of Okins Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PlayD and Okins Electronics.

Diversification Opportunities for PlayD and Okins Electronics

0.3

Correlation Coefficient

PlayD  Okins Electronics

Weak diversification

The 3 months correlation between PlayD and Okins is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding PlayD Co and Okins Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okins Electronics and PlayD 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 PlayD Co are associated (or correlated) with Okins Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okins Electronics has no effect on the direction of PlayD i.e., PlayD and Okins Electronics go up and down completely randomly.

Pair Corralation between PlayD and Okins Electronics

Assuming the 90 days trading horizon PlayD Co is expected to under-perform the Okins Electronics. But the stock apears to be less risky and, when comparing its historical volatility, PlayD Co is 1.61 times less risky than Okins Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Okins Electronics Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  457,000  in Okins Electronics Co on December 23, 2024 and sell it today you would earn a total of  147,000  from holding Okins Electronics Co or generate 32.17% return on investment over 90 days.

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

PlayD Co  vs.  Okins Electronics Co

PlayD

Risk-Adjusted Performance

Very Weak

Over the last 90 days PlayD Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PlayD is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Okins Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Okins Electronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Okins Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PlayD and Okins Electronics

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

The idea behind PlayD Co and Okins Electronics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.