Correlation Between President Chain and Makalot Industrial

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

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

Diversification Opportunities for President Chain and Makalot Industrial

0.66

Correlation Coefficient

President Chain  Makalot Industrial

Poor diversification

The 3 months correlation between President and Makalot is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Makalot Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makalot Industrial and President Chain 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 President Chain Store are associated (or correlated) with Makalot Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makalot Industrial has no effect on the direction of President Chain i.e., President Chain and Makalot Industrial go up and down completely randomly.

Pair Corralation between President Chain and Makalot Industrial

Assuming the 90 days trading horizon President Chain Store is expected to generate 0.53 times more return on investment than Makalot Industrial. However, President Chain Store is 1.9 times less risky than Makalot Industrial. It trades about -0.03 of its potential returns per unit of risk. Makalot Industrial Co is currently generating about -0.11 per unit of risk. If you would invest  27,950  in President Chain Store on September 4, 2024 and sell it today you would lose (750.00) from holding President Chain Store or give up 2.68% of portfolio value over 90 days.

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

President Chain Store  vs.  Makalot Industrial Co

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, President Chain is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Makalot Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makalot Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with President Chain and Makalot Industrial

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

The idea behind President Chain Store and Makalot Industrial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..