Correlation Between Masterwork Machinery and PKU HealthCare

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

By analyzing existing cross correlation between Masterwork Machinery and PKU HealthCare Corp, you can compare the effects of market volatilities on Masterwork Machinery and PKU HealthCare 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 Masterwork Machinery with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterwork Machinery and PKU HealthCare.

Diversification Opportunities for Masterwork Machinery and PKU HealthCare

0.65

Correlation Coefficient

Masterwork Machinery  PKU HealthCare

Poor diversification

The 3 months correlation between Masterwork and PKU is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Masterwork Machinery 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 Masterwork Machinery are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and PKU HealthCare go up and down completely randomly.

Pair Corralation between Masterwork Machinery and PKU HealthCare

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 1.32 times more return on investment than PKU HealthCare. However, Masterwork Machinery is 1.32 times more volatile than PKU HealthCare Corp. It trades about 0.02 of its potential returns per unit of risk. PKU HealthCare Corp is currently generating about -0.01 per unit of risk. If you would invest  538.00  in Masterwork Machinery on October 4, 2024 and sell it today you would earn a total of  25.00  from holding Masterwork Machinery or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Masterwork Machinery  vs.  PKU HealthCare Corp

Masterwork Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

PKU HealthCare Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PKU HealthCare Corp 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.

Pair Trading with Masterwork Machinery and PKU HealthCare

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

The idea behind Masterwork Machinery and PKU HealthCare Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.