Correlation Between Elite Material and Pan Jit

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

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

Diversification Opportunities for Elite Material and Pan Jit

-0.06

Correlation Coefficient

Elite Material  Pan Jit

Good diversification

The 3 months correlation between Elite and Pan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Pan Jit International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Jit International and Elite Material 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 Elite Material Co are associated (or correlated) with Pan Jit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Jit International has no effect on the direction of Elite Material i.e., Elite Material and Pan Jit go up and down completely randomly.

Pair Corralation between Elite Material and Pan Jit

Assuming the 90 days trading horizon Elite Material is expected to generate 1.7 times less return on investment than Pan Jit. In addition to that, Elite Material is 1.85 times more volatile than Pan Jit International. It trades about 0.15 of its total potential returns per unit of risk. Pan Jit International is currently generating about 0.47 per unit of volatility. If you would invest  4,595  in Pan Jit International on December 5, 2024 and sell it today you would earn a total of  815.00  from holding Pan Jit International or generate 17.74% return on investment over 90 days.

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

Elite Material Co  vs.  Pan Jit International

Elite Material

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Pan Jit International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Jit International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Pan Jit is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elite Material and Pan Jit

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

The idea behind Elite Material Co and Pan Jit International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.