Correlation Between Handok Clean and PI Advanced

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

By analyzing existing cross correlation between Handok Clean Tech and PI Advanced Materials, you can compare the effects of market volatilities on Handok Clean and PI Advanced 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 Handok Clean with a short position of PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Handok Clean and PI Advanced.

Diversification Opportunities for Handok Clean and PI Advanced

0.88

Correlation Coefficient

Handok Clean  PI Advanced

Very poor diversification

The 3 months correlation between Handok and 178920 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials and Handok Clean 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 Handok Clean Tech are associated (or correlated) with PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Handok Clean i.e., Handok Clean and PI Advanced go up and down completely randomly.

Pair Corralation between Handok Clean and PI Advanced

Assuming the 90 days trading horizon Handok Clean is expected to generate 2.07 times less return on investment than PI Advanced. But when comparing it to its historical volatility, Handok Clean Tech is 3.09 times less risky than PI Advanced. It trades about 0.64 of its potential returns per unit of risk. PI Advanced Materials is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  1,425,000  in PI Advanced Materials on October 9, 2024 and sell it today you would earn a total of  456,000  from holding PI Advanced Materials or generate 32.0% return on investment over 90 days.

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

Handok Clean Tech  vs.  PI Advanced Materials

Handok Clean Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handok Clean Tech 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.

PI Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Handok Clean and PI Advanced

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

The idea behind Handok Clean Tech and PI Advanced Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.